DENVER, CO--(Marketwired - Nov 12, 2015) - ENSERVCO Corporation (
ENSERVCO Corporation (
"In spite of the industry downturn, we're pleased to report that in the third quarter, the Company's slowest quarter of the year, ENSERVCO's core well enhancement revenue declined by only 1% and overall revenue was down just 8% year over year at a time when most service companies are reporting significant, double digit declines in revenue and profitability," said Rick Kasch, chairman and CEO. "The overall 8% revenue decline was almost entirely due to a decline in water hauling revenue as we cut back on servicing customers at low or no margin rates. We attribute the minimal decline in well enhancement revenue to the positive impact of our geographic expansion into the Eagle Ford basin in Texas and to our ability to maintain and in some cases increase market share in certain areas in the face of fierce pricing competition and an overall reduction in drilling, completion and maintenance activity. These positive factors helped offset price concessions, which were approximately 5% of revenue for the quarter. Although we don't know to what extent, we anticipate that pricing pressures will continue into the fourth quarter and fiscal 2016.
"In recent quarters we have been focused on maximizing utilization and controlling our cost structure by redeploying personnel and assets to our most active and profitable customers and basins," Kasch added. "These actions have contributed to an improvement in our key profit metrics year over year. Gross profit improved from a loss of $570,000 to essentially breakeven, reflecting cost control measures and lower diesel fuel prices. Our net loss improved 11% year over year in spite of a 68% increase in depreciation and amortization resulting from our fleet expansion. And our EBITDA loss during our historically slowest quarter improved $588,000, or 41%, to a loss of $831,000.
"With our two off-season quarters behind us, we're entering our heating season in a very strong position. With several new customers, a fleet that has doubled in size year-over-year, and a strong balance sheet with high liquidity, we are entering what are historically our two best quarters with confidence. While there is no question that commodity prices and a resultant scale-back in frac activity will continue to impact our frac water heating business in the foreseeable future, we believe we have a solid foundation to weather the downturn and emerge as a larger, more substantial company. In the meantime, we are focused on maintaining our customer relationships with superior service, winning new business in legacy and expansion areas, and controlling costs. And with the expansion of our fleet, which doubled our revenue capacity over the past year, we will be able to quickly respond to increased demand when the commodity prices recover."
Third Quarter Results
Total third quarter revenue declined 8% to $5.3 million from $5.7 million in the same quarter last year. The vast majority of the decline was attributable to a decline in low margin water hauling activities in favor of focusing on maximizing core well enhancement business opportunities.
Revenue mix in the third quarter included $3.4 million in core well enhancement revenue, down 1% from the same quarter last year. The two primary components of well enhancement revenue were hot oiling, which was up 2% to $2.6 million year over year as expansion activities added incremental revenue; and acidizing, which was down 10% to $693,000 due to customers postponing maintenance work. The Company believes that that maintenance work will eventually be commissioned, and in the meantime has lowered its stimulation prices and partnered with chemical suppliers to jointly develop and market new programs. Fluid management and other revenue was $1.9 million in the third quarter, down 17% from $2.3 million for reasons previously mentioned.
Gross profit improved by $523,000 year over year to a negative $47,000 from a negative $570,000. This improvement reflected the Company's efforts to reduce operating costs associated with labor, equipment repairs and maintenance, and supplies. The Company also benefitted from lower diesel fuel costs. The lower operating costs were partially offset by the impact of selective price concessions.
Total operating expenses in the third quarter increased 15% to $2.5 million from $2.2 million in the same quarter last year. This increase reflected a 68% increase ($600,000) in depreciation and amortization expense due to the larger fleet size offset by a 22% decline ($266,000) in general and administrative expense.
Net loss improved by 11% to $1.6 million, or $0.04 per diluted share, from a net loss of $1.8 million, or $0.05 per diluted share, in the same quarter last year. The impact of additional depreciation expense on EPS was $0.01 in the third quarter.
Adjusted EBITDA loss during the quarter improved $588,000, or 41%, to $831,000 from $1.4 million a year ago.
Nine-Month Results
Revenue in the first nine months of 2015 decreased 21% to $30.2 million from $38.3 million in the same period last year. Approximately 81%, or $6.6 million, of that decrease was attributable to the year-over-year decline in propane revenue in the first quarter of 2015, which was due to lower propane prices and a decrease in volume sold due to customers either taking advantage of the Company's cost-saving bi-fuel system or providing their own fuel source.
Gross profit for the nine months declined $1.0 million to $8.0 million primarily due to continuing labor costs during unexpected downtime caused by unseasonably warm weather in the DJ Basin during the first quarter, lower gross profits on propane sales during the first quarter, and year to date price concessions granted to customers. The declines were partially mitigated by management cost reduction efforts and lower fuel prices.
Gross margin increased to 26% from 24% a year ago due primarily to the mathematical impact of lower propane revenue and costs.
Total operating expenses in the first nine months of 2015 increased 36% to $7.9 million from $5.8 million a year ago. This increase was almost entirely attributable to a $2.0 million increase in depreciation and amortization expense year over year related to fleet growth. The Company also had a $313,000 increase in patent litigation expense, although that litigation process is currently under a judge's stay order. The foregoing expense increases were partially offset by a $195,000 decrease in general and administrative expense for the comparative nine-month periods.
Operating income through nine months declined to $106,000 from $3.2 million last year due to lower gross margins and higher depreciation and litigation expense. Net loss through nine months was $371,000, or $0.01 per diluted share, versus net income of $1.5 million, or $0.04 per diluted share, a year ago. The impact of additional depreciation and patent litigation costs on EPS was $0.04 in the nine-month period.
Adjusted EBITDA through the first nine months was $5.3 million, down from $6.2 million a year ago due primarily to the $1.0 million decline in gross profit.
ENSERVCO generated $12.9 million in net cash from operations in the first nine months, up 14% from $11.3 million in the same period last year. The Company closed the first nine months with working capital of $4.7 million. Cash flow from operations were used to pay down the Company's senior credit facility with PNC bank to $18.9 million year to date, thereby improving the long-term debt to equity ratio to 1.05 to 1 as compared to 1.63 to 1 at 2014 year-end.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 1:00 p.m. Eastern (11:00 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 November 19, 2015, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13622881. To listen to the webcast, participants should go to the ENSERVCO website 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=174442.
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 in seven major domestic oil and gas fields, serving customers 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 (net income or loss) 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 our fiscal year 2014 Form 10-K filed on March 19, 2015, and subsequently filed documents. 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 | |||||||||||||||||||
Condensed Consolidated Statement Of Operations And Comprehensive Income (Loss) | |||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
Revenues | $ | 5,308,854 | $ | 5,748,754 | $ | 30,150,900 | $ | 38,285,655 | |||||||||||
Cost of Revenues | 5,355,942 | 6,319,040 | 22,184,102 | 29,287,402 | |||||||||||||||
Gross Profit (Loss) | (47,088 | ) | (570,286 | ) | 7,966,798 | 8,998,253 | |||||||||||||
Operating Expenses | |||||||||||||||||||
General and administrative expenses | 954,831 | 1,220,877 | 3,115,557 | 3,310,518 | |||||||||||||||
Patent litigation and defense costs | 53,844 | 63,386 | 493,058 | 179,807 | |||||||||||||||
Depreciation and amortization | 1,489,352 | 884,964 | 4,252,124 | 2,288,852 | |||||||||||||||
Total operating expenses | 2,498,027 | 2,169,227 | 7,860,739 | 5,779,177 | |||||||||||||||
Income (Loss) from Operations | (2,545,115 | ) | (2,739,513 | ) | 106,059 | 3,219,076 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||
Interest expense | (360,434 | ) | (225,062 | ) | (860,865 | ) | (720,489 | ) | |||||||||||
Other income | 22,642 | 21,775 | 53,822 | 44,962 | |||||||||||||||
Total other expense | (337,792 | ) | (203,287 | ) | (807,043 | ) | (675,527 | ) | |||||||||||
Income (Loss) Before Tax Expense | (2,882,907 | ) | (2,942,800 | ) | (700,984 | ) | 2,543,549 | ||||||||||||
Income Tax Benefit (Expense) | 1,234,716 | 1,094,774 | 330,162 | (1,056,639 | ) | ||||||||||||||
Net Income (Loss) | $ | (1,648,191 | ) | $ | (1,848,026 | ) | $ | (370,822 | ) | $ | 1,486,910 | ||||||||
Other Comprehensive Income (Loss) | - | (3,735 | ) | - | (7,075 | ) | |||||||||||||
Comprehensive Income (Loss) | $ | (1,648,191 | ) | $ | (1,851,761 | ) | $ | (370,822 | ) | $ | 1,479,835 | ||||||||
Earnings (Loss) per Common Share - Basic | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.01 | ) | $ | 0.04 | ||||||||
Earnings (Loss) per Common Share - Diluted | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.01 | ) | $ | 0.04 | ||||||||
Basic weighted average number of common shares outstanding | 38,101,647 | 36,816,875 | 37,740,843 | 36,359,251 | |||||||||||||||
Add: Dilutive shares assuming exercise of options and warrants | - | - | - | 1,404,213 | |||||||||||||||
Diluted weighted average number of common shares outstanding | 38,101,647 | 36,816,875 | 37,740,843 | 37,763,464 | |||||||||||||||
ENSERVCO CORPORATION | |||||||||||||||||||
Calculation of Adjusted EBITDA * | |||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
Adjusted EBITDA* | |||||||||||||||||||
Net Income (Loss) | $ | (1,648,191 | ) | $ | (1,848,026 | ) | $ | (370,822 | ) | $ | 1,486,910 | ||||||||
Add Back (Deduct) | |||||||||||||||||||
Interest expense | 360,434 | 225,062 | 860,865 | 720,489 | |||||||||||||||
Provision for income taxes (benefit) expense | (1,234,716 | ) | (1,094,774 | ) | (330,162 | ) | 1,056,639 | ||||||||||||
Depreciation and amortization | 1,489,352 | 884,964 | 4,252,124 | 2,288,852 | |||||||||||||||
EBITDA* | (1,033,121 | ) | (1,832,774 | ) | 4,412,005 | 5,552,890 | |||||||||||||
Add Back (Deduct) | |||||||||||||||||||
Stock-based compensation | 170,972 | 372,239 | 442,243 | 520,519 | |||||||||||||||
Patent Litigation and defense costs | 53,844 | 63,386 | 493,058 | 179,807 | |||||||||||||||
(Gain) on sale and disposal of equipment | - | (507 | ) | 1,071 | (9,744 | ) | |||||||||||||
Interest and other income | (22,642 | ) | (21,268 | ) | (54,893 | ) | (35,218 | ) | |||||||||||
Adjusted EBITDA* | $ | (830,947 | ) | $ | (1,418,924 | ) | $ | 5,293,484 | $ | 6,208,254 | |||||||||
ENSERVCO CORPORATION | |||||||
Condensed Consolidated Balance Sheets | |||||||
September 30, | December 31, | ||||||
ASSETS | 2015 | 2014 | |||||
(Unaudited) | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 747,500 | $ | 954,058 | |||
Accounts receivable, net | 3,212,609 | 14,679,858 | |||||
Prepaid expenses and other current assets | 1,287,107 | 1,540,667 | |||||
Inventories | 324,578 | 390,081 | |||||
Income tax receivable | 1,967,732 | 1,776,035 | |||||
Deferred tax asset | 135,055 | 135,055 | |||||
Total current assets | 7,674,581 | 19,475,754 | |||||
Property and Equipment, net | 37,105,534 | 37,789,004 | |||||
Goodwill | 301,087 | 301,087 | |||||
Other Assets | 686,939 | 716,836 | |||||
TOTAL ASSETS | $ | 45,768,141 | $ | 58,282,681 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 2,665,704 | $ | 5,472,163 | |||
Current portion of long-term debt | 321,737 | 340,520 | |||||
Total current liabilities | 2,987,441 | 5,812,683 | |||||
Long-Term Liabilities | |||||||
Senior revolving credit facility | 18,929,416 | 28,634,037 | |||||
Long-term debt, less current portion | 618,189 | 801,968 | |||||
Deferred income taxes, net | 4,623,748 | 4,992,681 | |||||
Total long-term liabilities | 24,171,353 | 34,428,686 | |||||
Total Liabilities | 27,158,794 | 40,241,369 | |||||
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, 38,214,758 and 37,159,815 shares issued, respectively; 103,600 shares of treasury stock; and 38,111,158 and 37,056,215 shares outstanding, respectively | 190,556 | 185,282 | |||||
Additional paid-in capital | 13,684,972 | 12,751,389 | |||||
Accumulated earnings | 4,733,819 | 5,104,641 | |||||
Total stockholders' equity | 18,609,347 | 18,041,312 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 45,768,141 | $ | 58,282,681 | |||
ENSERVCO CORPORATION | ||||||||||||||||||
Condensed Consolidated Statement of Cash Flows | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||
Net income (loss) | $ | (1,648,191 | ) | $ | (1,848,026 | ) | $ | (370,822 | ) | $ | 1,486,910 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||||||||||||
Depreciation and amortization | 1,489,352 | 884,964 | 4,252,124 | 2,288,852 | ||||||||||||||
Loss on sale and disposal of equipment | - | (507 | ) | 1,071 | (9,744 | ) | ||||||||||||
Deferred income taxes | (1,178,098 | ) | (65,572 | ) | (368,933 | ) | 64,259 | |||||||||||
Stock-based compensation | 170,972 | 372,239 | 442,243 | 520,519 | ||||||||||||||
Amortization of debt issuance costs | 32,265 | 63,174 | 90,048 | 225,823 | ||||||||||||||
Bad debt expense | 8,205 | 41,807 | 21,050 | 91,807 | ||||||||||||||
Changes in operating assets and liabilities | ||||||||||||||||||
Accounts receivable | 657,071 | 246,640 | 11,446,199 | 7,889,279 | ||||||||||||||
Inventories | (19,733 | ) | 67,107 | 65,503 | (61,614 | ) | ||||||||||||
Prepaid expense and other current assets | (263,144 | ) | 326,095 | 278,560 | (237,670 | ) | ||||||||||||
Income taxes receivable | (62,091 | ) | (56,887 | ) | (191,697 | ) | (56,887 | ) | ||||||||||
Other non-current assets | 14,849 | (381,758 | ) | 14,849 | (395,759 | ) | ||||||||||||
Accounts payable and accrued liabilities | 958,066 | 1,372,675 | (2,806,459 | ) | 729,921 | |||||||||||||
Income taxes payable | - | (976,591 | ) | - | (1,278,599 | ) | ||||||||||||
Net cash provided by operating activities | 159,523 | 45,360 | 12,873,736 | 11,257,097 | ||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||
Purchases of property and equipment | (429,623 | ) | (6,155,517 | ) | (3,574,725 | ) | (12,760,006 | ) | ||||||||||
Proceeds from sale of equipment | - | - | 5,000 | 50,000 | ||||||||||||||
Net cash used in investing activities | (429,623 | ) | (6,155,517 | ) | (3,569,725 | ) | (12,710,006 | ) | ||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||
Net line of credit borrowings (payments) | 376,522 | 13,763,001 | (9,704,621 | ) | 13,763,001 | |||||||||||||
Repayment of long-term debt | (34,703 | ) | (11,324,687 | ) | (202,562 | ) | (12,481,676 | ) | ||||||||||
Proceeds from exercise of warrants | - | - | 77,100 | 187,804 | ||||||||||||||
Proceeds from exercise of options | 12,250 | 61,537 | 198,285 | 127,987 | ||||||||||||||
Payment of debt issuance costs | (100,000 | ) | (163,962 | ) | (100,000 | ) | (163,962 | ) | ||||||||||
Excess tax benefits from exercise of options and warrants | 3,109 | - | 221,229 | - | ||||||||||||||
Net cash provided by (used in) financing activities | 257,178 | 2,335,889 | (9,510,569 | ) | 1,433,154 | |||||||||||||
Net Decrease in Cash and Cash Equivalents | (12,922 | ) | (3,774,268 | ) | (206,558 | ) | (19,755 | ) | ||||||||||
Cash and Cash Equivalents, Beginning of Period | 760,422 | 5,622,703 | 954,058 | 1,868,190 | ||||||||||||||
Cash and Cash Equivalents, End of Period | $ | 747,500 | $ | 1,848,435 | $ | 747,500 | $ | 1,848,435 | ||||||||||
Supplemental cash flow information consists of the following: | ||||||||||||||||||
Cash paid for interest | $ | 219,192 | $ | 126,711 | $ | 841,252 | $ | 478,531 | ||||||||||
Cash paid for taxes | $ | 2,362 | $ | 5,998 | $ | 9,236 | $ | 2,329,588 | ||||||||||
Supplemental Disclosure of Non-cash Investing and Financing Activities: | ||||||||||||||||||
Cashless exercise of stock options and warrants | $ | - | $ | 364 | $ | 2,751 | $ | 7,532 | ||||||||||
Contact Information:
Contact:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-393-7044
Email: