DENVER, CO--(Marketwired - Nov 14, 2013) - ENSERVCO Corporation (
- Operating cash flow for third quarter and 9-month period improves to $1.9 million and $10.5 million, up 990% and 392% versus comparable 2012 periods
- Well Enhancement division achieves 11th consecutive quarter of year-over-year revenue growth
- Strong well enhancement demand fuels $4 million increase in CAPEX program
ENSERVCO Corporation (
Despite an eleventh consecutive quarter of year-over-year revenue growth at the Company's core Well Enhancement division, total revenues for the third quarter declined 8% to $4.8 million from $5.2 million in the comparable quarter last year. The decrease for the third quarter -- traditionally the Company's slowest fiscal period -- was due to an 18% decline in Fluid Management revenues, which were $2.4 million versus $3.0 million in last year's third quarter resulting from the wind down of work for a low-margin water hauling customer in Kansas. By the end of the quarter, the Company had secured higher margin work from a new customer that largely replaced the lost revenue.
Revenue from well enhancement services (frac heating, hot oiling, well acidizing and pressure testing) increased 11% to $2.3 million from $2.1 million in the third quarter last year. This growth was significantly tempered by severe flooding during September in Colorado's DJ Basin, currently the most active service territory for the Company's Well Enhancement division.
Third quarter gross margin was 3% versus 7% in the prior year's third quarter. Third quarter gross margin is generally much lower than in any other quarter due to the seasonal dip in revenue, fixed costs and increased labor expense associated with training new personnel for the upcoming heating season.
Third quarter loss from operations was $1.3 million versus an operating loss of $823,000 in the third quarter last year. Net loss was $919,000, or $0.03 per diluted share, on 32.3 million diluted shares outstanding, versus a net loss of $472,000, or $0.02 per diluted share, on 21.8 million diluted shares outstanding, in the comparable year-ago quarter.
Third quarter adjusted EBITDA* was a negative $626,000 versus a negative $237,000 in the 2012 third quarter.
Nine-month results
Revenue for the nine-month period increased 55% to $31.3 million from $20.2 million in the same period a year ago. The increase is attributable to greater customer activity, an increase in fluid heating capacity and the impact of cooler winter temperatures across the Company's service territories during the first half of 2013. Gross margin for the nine-month period increased to 34% from 21% in the 2012 nine-month period.
Operating income increased to $6.0 million from an operating loss of $485,000 in the nine-month period last year. Net income increased to $3.2 million, or $0.09 per diluted share, from a net loss of $634,000, or $0.03 per diluted share, in the 2012 nine-month period. Income in this year's nine-month period reflected a $722,000 decrease in depreciation expense versus the same period last year. The decrease resulted from a reassessment of the estimated useful lives of the Company's trucks, equipment and disposal wells in April 2012.
Adjusted EBITDA in the year-to-date period increased 272% to $8.1 million from $2.2 million during the first nine months of 2012.
Operating cash flow was $10.5 million, up 392% from $2.1 million at the nine-month mark last year. The increase was largely due to strong cash collections following the Company's record fourth quarter 2012 and first quarter 2013 revenue results, and was partially offset by reductions in accounts payable and accrued expenses.
Balance sheet highlights
ENSERVCO ended the third quarter with a strong financial position. The Company's balance sheet included cash and cash equivalents of $5.4 million, up from $534,000 at December 31, 2012. Working capital was $5.1 million, up from $1.5 million, and the Company's current ratio improved to 2.1:1 from 1.2:1 at the end of 2012. Since the end of last year, the Company has reduced total liabilities by $3.1 million, or 16%.
Subsequent events
Subsequent to the end of the third quarter, the Company recognized cash proceeds of $1.2 million from the exercise of common stock purchase warrants. These included warrants to acquire 2.1 million common shares by the Company's chairman and CEO, Mike Herman. Following the warrant exercise, Mr. Herman's ownership stake in ENSERVCO's common stock was approximately 41%. Proceeds from the warrant exercise will be used to partially fund the Company's expanded CAPEX program discussed below.
Management commentary
"Our third quarter, which accounts for less than 12% of revenue during the past 12 months, was accompanied by some unavoidable operational challenges that ranged from historic flooding in our most active service region to a customer transition," said Rick Kasch, president. "However, the quarter also was marked by some important strategic developments that have strengthened our business and positioned us for continued growth during what is already proving to be a very active season for our flagship Well Enhancement division.
"Particularly noteworthy was the progress we made during the quarter in our new southwest Wyoming territory, where one of the region's largest operators has commissioned us to perform year-round hot oiling work in the Green River Basin. This program alone could add more than $4 million in incremental revenue to our full-year results. We are currently pursuing several additional opportunities in the region, including the establishment of a significant well acidizing operation.
"Our Colorado-based fabricator, which suspended equipment deliveries for nearly four weeks due to flood damage, is back on line and has released several new hot oiling and frac heating units to us in recent weeks," Kasch added. "The balance of the equipment commissioned under our initial $4.7 million capital expenditure program should be in the field by the end of November. In the meantime, we have leased three frac heating units from third parties to help us meet demand through the end of the season."
Kasch said in light of current demand, management is planning to continue the expansion of the Company's equipment fleet. ENSERVCO's commercial lender, PNC Bank, has approved an additional $4.0 million in capital expenditures, $3.0 million of which will be financed from an expansion of the Company's equipment term loan with PNC, and the remaining $1.0 million coming from proceeds of recent warrant exercises. The Company expects to order four new hot oiling trucks and up to four additional frac heating units under the expanded CAPEX program.
"In recent weeks, activity in the DJ Basin has picked up significantly as customers are making up for lost productivity during the floods," Kasch said. "Despite the short-term impact this situation had on our business, we believe the increase in activity in the DJ Basin and our Utica Shale territory, as well as our five other service regions, combined with our new fluid heating capacity and increased water hauling business, will result in meaningful growth in the fourth quarter and first half 2014."
ENSERVCO previously announced plans to pursue an up-listing of its common stock on a major U.S. exchange. Kasch said the Company recently submitted a listing application to one of the exchanges, and is now evaluating timing of various follow-on steps in the process.
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 November 21, 2013, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID # 13572719. 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=171875
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 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 six 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.
*All revenue and earnings results discussed herein exclude discontinued operations, which resulted in pretax losses of (a) $0.00 and $163,000 for the third quarters of 2013 and 2012, respectively, and (b) $121,000 and $481,000 for the nine-month periods of 2013 and 2012, respectively.
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 28, 2013. 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 Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| Revenues | $ | 4,803,503 | $ | 5,204,348 | $ | 31,318,304 | $ | 20,243,521 | ||||||||||
| Cost of Revenues | 4,656,508 | 4,848,019 | 20,799,074 | 15,930,345 | ||||||||||||||
| Gross Profit | 146,995 | 356,329 | 10,519,230 | 4,313,176 | ||||||||||||||
| Operating Expenses | ||||||||||||||||||
| General and administrative expenses | 890,675 | 652,208 | 2,865,542 | 2,382,304 | ||||||||||||||
| Depreciation and amortization | 543,671 | 527,503 | 1,693,871 | 2,415,881 | ||||||||||||||
| Total Operating Expenses | 1,434,346 | 1,179,711 | 4,559,413 | 4,798,185 | ||||||||||||||
| Income (Loss) from Operations | (1,287,351 | ) | (823,382 | ) | 5,959,817 | (485,009 | ) | |||||||||||
| Other Income (Expense) | ||||||||||||||||||
| Interest expense | (247,346 | ) | (211,411 | ) | (813,052 | ) | (638,244 | ) | ||||||||||
| Gain on disposal of equipment | 6,842 | 251,875 | 313,299 | 253,411 | ||||||||||||||
| Other income | 4,600 | (14,764 | ) | 29,338 | 65,075 | |||||||||||||
| Total Other Income (Expense) | (235,904 | ) | 25,700 | (470,415 | ) | (319,758 | ) | |||||||||||
| Income (Loss) From Continued Operations, Before Tax Expense | (1,523,255 | ) | (797,682 | ) | 5,489,402 | (804,767 | ) | |||||||||||
| Income Tax (Expense) Benefit | 603,835 | 425,175 | (2,210,169 | ) | 463,904 | |||||||||||||
| Income (Loss) From Continued Operations, Net of Tax | (919,420 | ) | (372,507 | ) | 3,279,233 | (340,863 | ) | |||||||||||
| Discontinued Operations | ||||||||||||||||||
| Loss From Discontinued Operations, Before Tax | - | (163,437 | ) | (120,845 | ) | (480,585 | ) | |||||||||||
| Income Tax Benefit | - | 63,740 | 47,130 | 187,428 | ||||||||||||||
| Loss From Discontinued Operations, Net of Tax | - | (99,697 | ) | (73,715 | ) | (293,157 | ) | |||||||||||
| Net Income (Loss) | $ | (919,420 | ) | $ | (472,204 | ) | $ | 3,205,518 | $ | (634,020 | ) | |||||||
| Other Comprehensive Income (Loss) | ||||||||||||||||||
| Unrealized gain (loss) on interest rate swaps, net of tax | 355 | - | 3,452 | - | ||||||||||||||
| Settlements - interest rate swap | 7,070 | - | 20,890 | - | ||||||||||||||
| Reclassification into earnings - interest rate swap | (7,070 | ) | - | (20,890 | ) | - | ||||||||||||
| Unrealized loss on available-for-sale securities, net of tax | - | - | - | (23,073 | ) | |||||||||||||
| Total Other Comprehensive Income (Loss) | 355 | - | 3,452 | (23,073 | ) | |||||||||||||
| Comprehensive Income (Loss) | $ | (919,065 | ) | $ | (472,204 | ) | $ | 3,208,970 | $ | (657,093 | ) | |||||||
| Earnings per Common Share - Basic | ||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.03 | ) | $ | (0.02 | ) | $ | 0.10 | $ | (0.02 | ) | |||||||
| Income (loss) from discontinued operations | - | - | - | (0.01 | ) | |||||||||||||
| Net Income | $ | (0.03 | ) | $ | (0.02 | ) | $ | 0.10 | $ | (0.03 | ) | |||||||
| Earnings per Common Share - Diluted | ||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.03 | ) | $ | (0.02 | ) | $ | 0.09 | $ | (0.02 | ) | |||||||
| Income (loss) from discontinued operations | - | - | - | (0.01 | ) | |||||||||||||
| Net Income | $ | (0.03 | ) | $ | (0.02 | ) | $ | 0.09 | $ | (0.03 | ) | |||||||
| Basic weighted average number of common shares outstanding | 32,262,639 | 21,778,866 | 32,064,182 | 21,778,866 | ||||||||||||||
| Add: Dilutive shares assuming exercise of options and warrants | - | - | 3,572,096 | - | ||||||||||||||
| Diluted weighted average number of common shares outstanding | 32,262,639 | 21,778,866 | 35,636,278 | 21,778,866 | ||||||||||||||
| ENSERVCO CORPORATION | ||||||||||||||||||
| Calculation of Adjusted EBITDA * | ||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| EBITDA* from continuing operations: | ||||||||||||||||||
| Income (Loss) from continuing operations | $ | (919,420 | ) | $ | (372,507 | ) | $ | 3,279,233 | $ | (340,863 | ) | |||||||
| Add Back (Deduct) | ||||||||||||||||||
| Interest Expense | 247,346 | 211,411 | 813,052 | 638,244 | ||||||||||||||
| Provision for income taxes | (603,835 | ) | (425,175 | ) | 2,210,169 | (463,904 | ) | |||||||||||
| Depreciation and amortization | 543,671 | 527,503 | 1,693,871 | 2,415,881 | ||||||||||||||
| EBITDA* from continuing operations | (732,238 | ) | (58,768 | ) | 7,996,325 | 2,249,358 | ||||||||||||
| Add Back (Deduct) | ||||||||||||||||||
| Stock-based compensation | 117,224 | 59,198 | 446,000 | 248,459 | ||||||||||||||
| (Gain) on sale and disposal of equipment | (6,842 | ) | (251,875 | ) | (313,299 | ) | (253,411 | ) | ||||||||||
| Interest and other income | (4,600 | ) | 14,764 | (29,338 | ) | (65,075 | ) | |||||||||||
| Adjusted EBITDA* from continuing operations | $ | (626,456 | ) | $ | (236,681 | ) | $ | 8,099,688 | $ | 2,179,331 | ||||||||
| EBITDA* from discontinued operations: | ||||||||||||||||||
| Income (Loss) from discontinued operations | $ | - | $ | (99,697 | ) | $ | (73,715 | ) | $ | (293,157 | ) | |||||||
| Add Back (Deduct) | ||||||||||||||||||
| Interest Expense | - | 297 | 963 | 1,468 | ||||||||||||||
| Income tax benefit | - | (63,740 | ) | (47,130 | ) | (187,428 | ) | |||||||||||
| Depreciation and amortization | - | 17,156 | - | 111,220 | ||||||||||||||
| EBITDA* and Adjusted EBITDA* from discontinued operations | $ | - | $ | (145,984 | ) | $ | (119,882 | ) | $ | (367,897 | ) | |||||||
| ENSERVCO CORPORATION | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| September 30, | December 31, | ||||||||
| ASSETS | 2013 | 2012 | |||||||
| (Unaudited) | |||||||||
| Current Assets | |||||||||
| Cash and cash equivalents | $ | 5,406,955 | $ | 533,627 | |||||
| Accounts receivable, net | 2,670,761 | 7,791,342 | |||||||
| Prepaid expenses and other current assets | 1,144,201 | 802,020 | |||||||
| Inventories | 298,065 | 273,103 | |||||||
| Deferred tax asset | 142,745 | 153,466 | |||||||
| Total current assets | 9,662,727 | 9,553,558 | |||||||
| Property and Equipment, net | 15,816,035 | 15,020,890 | |||||||
| Fixed Assets Held for Sale, net | - | 304,429 | |||||||
| Non-Competition Agreements, net | - | 30,000 | |||||||
| Goodwill | 301,087 | 301,087 | |||||||
| Long-Term Portion of Interest Rate Swap | 17,558 | 16,171 | |||||||
| Other Assets | 579,179 | 630,891 | |||||||
| TOTAL ASSETS | $ | 26,376,586 | $ | 25,857,026 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current Liabilities | |||||||||
| Accounts payable and accrued liabilities | $ | 2,071,518 | $ | 3,606,645 | |||||
| Income tax payable | 417,320 | - | |||||||
| Line of credit borrowings | - | 2,151,052 | |||||||
| Current portion of long-term debt | 2,071,859 | 2,236,343 | |||||||
| Current portion of interest rate swap | 14,880 | 24,048 | |||||||
| Total current liabilities | 4,575,577 | 8,018,088 | |||||||
| Long-Term Liabilities | |||||||||
| Long-term debt, less current portion | 9,139,185 | 10,570,928 | |||||||
| Deferred income taxes, net | 2,187,506 | 451,662 | |||||||
| Total long-term liabilities | 11,326,691 | 11,022,590 | |||||||
| Total Liabilities | 15,902,268 | 19,040,678 | |||||||
| 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, 32,439,824 and 31,928,894 shares issued, respectively, 103,600 shares of treasury stock, and 32,336,224 and 31,825,294 shares outstanding, respectively | 161,682 | 159,127 | |||||||
| Additional paid-in capital | 10,307,808 | 9,864,363 | |||||||
| Accumulated earnings (deficit) | 3,181 | (3,202,337 | ) | ||||||
| Accumulated other comprehensive income (loss) | 1,647 | (4,805 | ) | ||||||
| Total stockholders' equity | 10,474,318 | 6,816,348 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 26,376,586 | $ | 25,857,026 | |||||
| ENSERVCO CORPORATION | |||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||||||
| Net income (loss) | $ | (919,420 | ) | $ | (472,204 | ) | $ | 3,205,518 | $ | (634,020 | ) | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||||||||||||||||
| Depreciation and amortization (includes $17,156 and $111,220 from discontinued operations in the three and nine months endded 2012, respectively) | 543,671 | 544,659 | 1,693,871 | 2,527,101 | |||||||||||||||
| Gain on disposal of equipment | (6,842 | ) | (251,875 | ) | (313,299 | ) | (253,411 | ) | |||||||||||
| Realized gain on sale of marketable securities | - | - | - | (24,653 | ) | ||||||||||||||
| Deferred income taxes | (375,011 | ) | (488,915 | ) | 1,742,462 | (718,570 | ) | ||||||||||||
| Stock-based compensation | 117,224 | 59,198 | 446,000 | 248,485 | |||||||||||||||
| Amortization of debt issuance costs | 76,944 | - | 230,832 | - | |||||||||||||||
| Bad debt expense (recoveries) | - | 10,624 | 170,397 | 8,885 | |||||||||||||||
| Changes in operating assets and liabilities | |||||||||||||||||||
| Accounts receivable | 2,506,976 | 55,985 | 4,950,184 | 732,153 | |||||||||||||||
| Inventories | (13,376 | ) | 48,978 | (24,962 | ) | 34,154 | |||||||||||||
| Prepaid expense and other current assets | 54,461 | (401,514 | ) | (342,181 | ) | (678,000 | ) | ||||||||||||
| Other non-current assets | (10,000 | ) | (15,904 | ) | (179,120 | ) | (865 | ) | |||||||||||
| Accounts payable and accrued liabilities | 194,412 | 1,088,996 | (1,535,127 | ) | 887,160 | ||||||||||||||
| Income taxes payable | (228,824 | ) | - | 417,320 | - | ||||||||||||||
| Net cash provided by operating activities | 1,940,215 | 178,028 | 10,461,895 | 2,128,419 | |||||||||||||||
| INVESTING ACTIVITIES | |||||||||||||||||||
| Purchases of property and equipment | (1,675,424 | ) | (357,060 | ) | (3,512,935 | ) | (2,295,826 | ) | |||||||||||
| Proceeds from sale and disposal of equipment | 8,942 | 382,000 | 1,811,275 | 385,500 | |||||||||||||||
| Sales of available-for-sale securities | - | - | - | 180,208 | |||||||||||||||
| Net cash provided by (used in) investing activities | (1,666,482 | ) | 24,940 | (1,701,660 | ) | (1,730,118 | ) | ||||||||||||
| FINANCING ACTIVITIES | |||||||||||||||||||
| Net line of credit (payments) borrowings | - | 5,350 | (2,151,052 | ) | 400,000 | ||||||||||||||
| Proceeds from issuance of long-term debt | - | - | - | 1,359,907 | |||||||||||||||
| Repayment of long-term debt | (601,483 | ) | (385,792 | ) | (1,735,855 | ) | (2,117,574 | ) | |||||||||||
| Net cash (used) provided by financing activities | (601,483 | ) | (380,442 | ) | (3,886,907 | ) | (357,667 | ) | |||||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | (327,750 | ) | (177,474 | ) | 4,873,328 | 40,634 | |||||||||||||
| Cash and Cash Equivalents, Beginning of Period | 5,734,705 | 635,113 | 533,627 | 417,005 | |||||||||||||||
| Cash and Cash Equivalents, End of Period | $ | 5,406,955 | $ | 457,639 | $ | 5,406,955 | $ | 457,639 | |||||||||||
| Supplemental cash flow information: | |||||||||||||||||||
| Cash paid for interest | $ | 180,371 | $ | 200,534 | $ | 532,655 | $ | 606,432 | |||||||||||
| Cash paid for taxes | $ | - | $ | - | $ | 3,257 | $ | - | |||||||||||
| Supplemental Disclosure of Non-cash Investing and Financing Activities: | |||||||||||||||||||
| Equipment purchased through installment loans | $ | 50,037 | $ | - | $ | 139,628 | $ | - | |||||||||||
| Cashless exercise of stock options and warrants | $ | 719 | $ | - | $ | 2,555 | $ | - | |||||||||||
| Increase (decrease) in fair value of available-for-sale securities | $ | - | $ | - | $ | - | $ | 29,415 | |||||||||||