ENSERVCO CORPORATION
DENVER, CO--(Marketwired - Aug 11, 2014) - ENSERVCO Corporation (
Selected Highlights:
- Six-month revenue and operating cash flow at record levels
- Demand continues to grow for year-round hot-oiling and acidizing services
- Fabrication of new well enhancement equipment proceeding on schedule
- Company introduces LNG Fueling System for Frac-Water Heaters
ENSERVCO Corporation (
As forecasted by management, revenue in the second quarter -- one of the Company's two off-season quarters -- was $7.3 million versus $7.9 million in the second quarter a year ago. While revenue from hot oiling and well acidizing services increased by 43%, or nearly $1 million, it was not enough to offset a $1.8 million decline in frac-water heating revenue versus last year's second quarter. As previously announced, a well-site accident in the DJ Basin during the second quarter led to a three-week halt in frac-water heating for one of the Company's largest customers. While an incident review determined the accident was caused by the failure of a third-party vendor's equipment, the heating season had slowed considerably by the time ENSERVCO was cleared by the customer to re-start frac-water heating services.
Gross profit margin was 12% versus 28% in the second quarter last year. The decline resulted from lower revenue as well as higher labor costs associated with frac-water heating crews that were waiting to re-start work in the DJ Basin during the aforementioned incident review. Higher equipment maintenance and insurance costs associated with the Company's expanding service fleet also impacted gross margin.
The Company reported a second quarter operating loss of $1.2 million versus operating income of $550,000 in the second quarter last year. Net loss was $851,000, or $0.02 per diluted share, on 36.5 million diluted shares outstanding, versus net income of $191,000, or $0.01 per diluted share, on 35.7 million diluted shares outstanding, in the comparable year-ago quarter. Second quarter adjusted EBITDA was a negative $356,000 versus a positive $1.4 million in the last year's second quarter.
Six-month results
Revenue for the six-month period increased 23% to a record $32.5 million from $26.5 million in the same period a year ago. The increase was attributable to a 36% improvement in first quarter revenue, which was driven both by strong customer utilization of the Company's expanding well enhancement fleet and higher propane prices.
Gross margin, was 30% versus 39% in the six-month period a year ago. The decline resulted from the previously mentioned well-site incident in the DJ Basin, as well as the impact of a first quarter spike in propane prices, which was detailed in the Company's first quarter earnings release.
Operating income was $6.0 million versus $7.1 million in the six-month period last year. Net income was $3.3 million, or $0.09 per diluted share, versus $4.1 million, or $0.12 per diluted share. Adjusted EBITDA in the year-to-date period was $7.5 million versus $8.6 million for the first six months of 2013.
Operating cash flow during the six-month period was a record $11.2 million, up 32% from $8.5 million at the six-month mark last year. The increase was due to strong cash collections following the 2013/2014 heating season. ENSERVCO closed the second quarter with cash and cash equivalents of $5.6 million and working capital of $5.8 million.
Management Commentary
"We made considerable progress on our growth initiatives during the second quarter, despite the short-term setback in the DJ Basin. Revenue from year-round well enhancement services continued to improve, with hot oiling revenue up 52% and acidizing revenue increasing 11% versus last year's second quarter. We are in the process of initiating multiple year-round well maintenance programs for several new and existing customers in our Rocky Mountain region and in Texas, and these should add several million dollars in incremental revenue. These programs should also result in a meaningful improvement in our third quarter financial results versus last year's third quarter.
"We recently completed a site tour at our primary fabricator, which is manufacturing much of the new equipment commissioned under our $16 million capital expenditure program. Fabrication is on pace to meet our original delivery schedules, and we were very encouraged by the progress we saw during our visit. Our fabricator has more than 60 employees working exclusively on the construction of our new 'mega' frac-water heaters and hot oiling units, most of which will enter the field before the end of the year."
Kasch continued, "Another recent achievement was the development by our technical team of a new liquefied natural gas (LNG) fueling system for our frac-water heaters. This new platform, which has been field-tested and is now commercially available, gives customers the option of using a cleaner burning fuel source than propane, which experienced extreme price volatility during the winter of 2013-2014. The system was designed at the request of the previously mentioned customer in the DJ Basin, which is seeking to utilize its own LNG as a fuel source on its drilling and well completion programs. This new fueling system is available to our entire customer base, and we believe gives us a distinct advantage over most competitors in the domestic frac-water heating space. We are actively marketing the system across our seven U.S. service territories.
"A new $40 million credit facility we expect to close on in September, the recent addition of Keith Behrens to our board of directors, and the ongoing diversification of our revenue stream are all indications of the Company's growing strength," Kasch added. "We are extremely encouraged by our recent accomplishments and prospects for continued financial and operational growth."
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 1 p.m. Eastern (11 a.m. Mountain) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through August 18, 2014, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13588249. To listen to the webcast, participants should access the ENSERVCO website, located at www.enservco.com, and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days. The webcast also is available at the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=173064
About ENSERVCO
Through its various operating subsidiaries, ENSERVCO has emerged as one of the energy service industry's leading providers of hot oiling, acidizing, frac-water heating and fluid management services. The Company owns and operates a fleet of more than 230 specialized trucks, trailers, frac tanks and related well-site equipment. ENSERVCO serves customers in seven major domestic oil and gas fields, and operates in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com.
*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in a Form 10-K filed on March 20, 2014. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.
| ENSERVCO CORPORATION | ||||||||||||||||||
| CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) | ||||||||||||||||||
| For the three months ended | For the six months ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Revenues | $ | 7,294,856 | $ | 7,947,635 | $ | 32,536,901 | $ | 26,514,802 | ||||||||||
| Cost of Revenues | 6,449,925 | 5,702,716 | 22,741,942 | 16,262,539 | ||||||||||||||
| Gross Profit | 844,931 | 2,244,919 | 9,794,959 | 10,252,263 | ||||||||||||||
| Operating Expenses | ||||||||||||||||||
| General and administrative expenses | 1,272,496 | 1,108,516 | 2,432,481 | 1,974,865 | ||||||||||||||
| Depreciation and amortization | 726,424 | 586,365 | 1,403,888 | 1,150,200 | ||||||||||||||
| Total Operating Expenses | 1,998,920 | 1,694,881 | 3,836,369 | 3,125,065 | ||||||||||||||
| (Loss) Income from Operations | (1,153,989 | ) | 550,038 | 5,958,590 | 7,127,198 | |||||||||||||
| Other Income (Expense) | ||||||||||||||||||
| Interest expense | (241,903 | ) | (251,655 | ) | (495,428 | ) | (566,670 | ) | ||||||||||
| (Loss) Gain on disposals of equipment | (5,129 | ) | - | 9,237 | 306,457 | |||||||||||||
| Other income | 7,050 | 10,215 | 13,950 | 24,827 | ||||||||||||||
| Total Other Expense | (239,982 | ) | (241,440 | ) | (472,241 | ) | (235,386 | ) | ||||||||||
| (Loss) Income Before Tax Expense | (1,393,971 | ) | 308,598 | 5,486,349 | 6,891,812 | |||||||||||||
| Income Tax Benefit (Expense) | 542,952 | (117,691 | ) | (2,151,412 | ) | (2,766,874 | ) | |||||||||||
| Net (Loss) Income | $ | (851,019 | ) | $ | 190,907 | 3,334,937 | 4,124,938 | |||||||||||
| Other Comprehensive Income (Loss) | ||||||||||||||||||
| Unrealized gain (loss) on interest rate swaps, net of tax | 483 | (4,135 | ) | (3,290 | ) | 6,097 | ||||||||||||
| Settlements - interest rate swap | 6,517 | 6,838 | 13,115 | 13,592 | ||||||||||||||
| Reclassification into earnings - interest rate swap | (6,517 | ) | (6,838 | ) | (13,115 | ) | (13,592 | ) | ||||||||||
| Total Other Comprehensive Income (Loss) | 483 | (4,135 | ) | (3,290 | ) | 6,097 | ||||||||||||
| Comprehensive (Loss) Income | $ | (850,536 | ) | $ | 186,772 | $ | 3,331,647 | $ | 4,131,035 | |||||||||
| (Loss) Earnings per Common Share - Basic | $ | (0.02 | ) | $ | 0.01 | $ | 0.09 | $ | 0.13 | |||||||||
| (Loss) Earnings per Common Share - Diluted | $ | (0.02 | ) | $ | 0.01 | $ | 0.09 | $ | 0.12 | |||||||||
| Basic weighted average number of common shares outstanding | 36,514,889 | 32,099,332 | 36,126,647 | 31,963,070 | ||||||||||||||
| Add: Dilutive shares assuming exercise of options and warrants | - | 3,589,220 | 2,466,052 | 3,444,113 | ||||||||||||||
| Diluted weighted average number of common shares outstanding | 36,514,889 | 35,688,552 | 38,592,699 | 35,407,183 | ||||||||||||||
| ENSERVCO CORPORATION | ||||||||||||||||||
| Calculation of Adjusted EBITDA * | ||||||||||||||||||
| For the three months ended | For the six months ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Adjusted EBITDA* | ||||||||||||||||||
| Net (Loss) Income | $ | (851,019 | ) | $ | 190,907 | $ | 3,334,937 | $ | 4,124,938 | |||||||||
| Add Back (Deduct) | ||||||||||||||||||
| Interest Expense | 241,903 | 251,655 | 495,428 | 566,670 | ||||||||||||||
| Provision for income taxes | (542,952 | ) | 117,691 | 2,151,412 | 2,766,874 | |||||||||||||
| Depreciation and amortization | 726,424 | 586,365 | 1,403,888 | 1,150,200 | ||||||||||||||
| EBITDA* | (425,644 | ) | 1,146,618 | 7,385,665 | 8,608,682 | |||||||||||||
| Add Back (Deduct) | ||||||||||||||||||
| Stock-based compensation | 71,935 | 260,054 | 148,280 | 328,776 | ||||||||||||||
| Loss (Gain) on sale and disposal of equipment | 5,129 | - | (9,237 | ) | (306,457 | ) | ||||||||||||
| Interest and other income | (7,050 | ) | (10,215 | ) | (13,950 | ) | (24,827 | ) | ||||||||||
| Adjusted EBITDA* | $ | (355,630 | ) | $ | 1,396,457 | $ | 7,510,758 | $ | 8,606,174 | |||||||||
| ENSERVCO CORPORATION | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| June 30 | December 31, | |||||||
| ASSETS | 2014 | 2013 | ||||||
| (Unaudited) | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 5,622,703 | $ | 1,868,190 | ||||
| Accounts receivable, net | 3,993,227 | 11,685,866 | ||||||
| Prepaid expenses and other current assets | 1,487,523 | 923,758 | ||||||
| Inventories | 443,725 | 315,004 | ||||||
| Deferred tax asset | 338,664 | 336,561 | ||||||
| Total current assets | 11,885,842 | 15,129,379 | ||||||
| Property and Equipment, net | 22,585,667 | 17,425,828 | ||||||
| Goodwill | 301,087 | 301,087 | ||||||
| Long-Term Portion of Interest Rate Swap | 9,627 | 18,616 | ||||||
| Other Assets | 398,690 | 547,338 | ||||||
| TOTAL ASSETS | $ | 35,180,913 | $ | 33,422,248 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 2,460,158 | $ | 3,102,912 | ||||
| Income taxes payable | 976,591 | 1,278,599 | ||||||
| Current portion of long-term debt | 2,634,978 | 2,562,141 | ||||||
| Current portion of interest rate swap | 8,370 | 11,966 | ||||||
| Total current liabilities | 6,080,097 | 6,955,618 | ||||||
| Long-Term Liabilities | ||||||||
| Long-term debt, less current portion | 9,970,222 | 11,200,048 | ||||||
| Deferred income taxes, net | 2,551,297 | 2,421,466 | ||||||
| Total long-term liabilities | 12,521,519 | 13,621,514 | ||||||
| Total Liabilities | 18,601,616 | 20,577,132 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Equity | ||||||||
| Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding | - | - | ||||||
| Common stock. $.005 par value, 100,000,000 shares authorized, 36,831,055 and 34,926,136 shares issued, respectively; 103,600 shares of treasury stock; and 36,727,455 and 34,822,536 shares outstanding, respectively | 183,638 | 174,113 | ||||||
| Additional paid-in capital | 11,961,042 | 11,568,033 | ||||||
| Accumulated earnings | 4,433,837 | 1,098,900 | ||||||
| Accumulated other comprehensive income | 780 | 4,070 | ||||||
| Total stockholders' equity | 16,579,297 | 12,845,116 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 35,180,913 | $ | 33,422,248 | ||||
| ENSERVCO CORPORATION | ||||||||||||||||||
| Condensed Consolidated Statement of Cash Flows | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| For the three months ended | For the six months ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||||
| Net (loss) income | $ | (851,019 | ) | $ | 190,907 | $ | 3,334,937 | $ | 4,124,938 | |||||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities | ||||||||||||||||||
| Depreciation and amortization | 726,424 | 586,365 | 1,403,888 | 1,150,200 | ||||||||||||||
| Loss (gain) on disposal of equipment | 5,129 | - | (9,237 | ) | (306,457 | ) | ||||||||||||
| Deferred income taxes | 129,780 | 978,087 | 129,831 | 2,117,472 | ||||||||||||||
| Stock-based compensation | 71,935 | 260,054 | 148,280 | 328,776 | ||||||||||||||
| Amortization of debt issuance costs | 81,325 | 76,945 | 162,649 | 153,888 | ||||||||||||||
| Bad debt expense | 40,000 | 44,163 | 50,000 | 170,397 | ||||||||||||||
| Changes in operating assets and liabilities | ||||||||||||||||||
| Accounts receivable | 13,781,701 | 8,198,556 | 7,642,639 | 2,443,208 | ||||||||||||||
| Inventories | (75,912 | ) | (19,805 | ) | (128,721 | ) | (11,586 | ) | ||||||||||
| Prepaid expense and other current assets | (193,869 | ) | 89,437 | (563,765 | ) | (396,642 | ) | |||||||||||
| Other non-current assets | - | - | (14,001 | ) | (169,120 | ) | ||||||||||||
| Accounts payable and accrued liabilities | (707,265 | ) | (1,663,196 | ) | (642,754 | ) | (1,729,538 | ) | ||||||||||
| Income taxes payable | (1,786,322 | ) | (863,153 | ) | (302,008 | ) | 646,144 | |||||||||||
| Net cash provided by from operating activities | 11,221,907 | 7,878,360 | 11,211,738 | 8,521,680 | ||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||||||
| Purchases of property and equipment | (5,099,341 | ) | (1,245,758 | ) | (6,604,490 | ) | (1,837,511 | ) | ||||||||||
| Proceeds from sale and disposal of equipment | - | - | 50,000 | 1,802,333 | ||||||||||||||
| Net cash used in investing activities | (5,099,341 | ) | (1,245,758 | ) | (6,554,490 | ) | (35,178 | ) | ||||||||||
| FINANCING ACTIVITIES | ||||||||||||||||||
| Net line of credit payments | (1,158,971 | ) | (1,234,447 | ) | - | (2,151,052 | ) | |||||||||||
| Proceeds from excerise of warrants | 98,175 | - | 187,804 | - | ||||||||||||||
| Proceeds from excerise of options | 25,200 | - | 66,450 | - | ||||||||||||||
| Repayment of long-term debt | (578,715 | ) | (466,721 | ) | (1,156,989 | ) | (1,134,372 | ) | ||||||||||
| Payments upon interest rate swap settlements | - | - | - | |||||||||||||||
| Net cash used in financing activities | (1,614,311 | ) | (1,701,168 | ) | (902,735 | ) | (3,285,424 | ) | ||||||||||
| Net Increase in Cash and Cash Equivalents | 4,508,255 | 4,931,434 | 3,754,513 | 5,201,078 | ||||||||||||||
| Cash and Cash Equivalents, Beginning of Period | 1,114,448 | 803,271 | 1,868,190 | 533,627 | ||||||||||||||
| Cash and Cash Equivalents, End of Period | $ | 5,622,703 | $ | 5,734,705 | $ | 5,622,703 | $ | 5,734,705 | ||||||||||
| Supplemental cash flow information consists of the following: | ||||||||||||||||||
| Cash paid for interest | $ | 106,642 | $ | 147,713 | $ | 319,571 | $ | 375,465 | ||||||||||
| Cash paid for taxes | $ | 1,112,000 | $ | 2,757 | $ | 2,325,257 | $ | 3,257 | ||||||||||
| Supplemental Disclosure of Non-cash Investing and Financing Activities: | ||||||||||||||||||
| Equipment purchased through installment loans | $ | - | $ | 89,591 | $ | - | $ | 89,591 | ||||||||||
| Cashless exercise of stock options and warrants | $ | 1,572 | $ | 1,836 | $ | 7,168 | $ | 1,836 | ||||||||||
