Attached files
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| 8-K - 8-K - Hi-Crush Inc. | proforma63013.htm |
Exhibit 99.1
Hi-Crush Partners LP
Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 2013 and the Year Ended December 31, 2012
Hi-Crush Partners LP
Index to Pro Forma Condensed Combined Statement of Operations
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Dollars in thousands, unless otherwise noted)
On June 10, 2013, Hi-Crush Partners LP (the “Partnership”) acquired D&I Silica, LLC (“D&I”) for $95,481 in cash, subject to a customary working capital adjustment, and 1,578,947 common units representing limited partner interests in the Partnership, valued at $37,358 as of June 10, 2013. The acquisition was financed through the funding of $100,000 drawn under the Partnership's credit facility.
The following unaudited pro forma condensed combined statement of operations of Hi-Crush Partners LP presents the combined results of operations of the Partnership as they may have appeared had the acquisition and financing transactions described above occurred on January 1, 2012.
The unaudited pro forma condensed combined statement of operations is provided for illustrative purposes only and does not purport to present what the actual results of operations would have been had all the transactions actually occurred on the date indicated, nor does it purport to represent results of operations for any future period or financial position for any future date. This statement does not reflect any cost savings or other benefits that may be obtained among the operations of Hi-Crush Partners LP and D&I Silica, LLC.
The unaudited pro forma condensed combined statement of operations have been derived from and should be read together with the historical consolidated financial statements and notes of Hi-Crush Partners LP and the historical financial statements of D&I Silica, LLC, both prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for the year ended December 31, 2012 and the three months ended March 31, 2013.
The unaudited pro forma condensed combined financial statements have been prepared on the basis that the Partnership is treated as a partnership for federal income tax purposes. The unaudited pro forma condensed combined financial statements should be read in conjunction with the notes accompanying these unaudited pro forma condensed combined financial statements and with the historical consolidated financial statements and related notes of the Partnership, as filed with the Securities and Exchange Commission.
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Hi-Crush Partners LP
Unaudited Pro Forma Condensed Combined Statement of Operations
for the six months ended June 30, 2013
(in thousands, expect unit and per unit information)
D&I Silica, LLC | |||||||||||||
Historical | |||||||||||||
(Period from | |||||||||||||
Hi-Crush | January 1 | Hi-Crush | |||||||||||
Partners LP | Through | Pro Forma | Partners LP | ||||||||||
Historical | June 10, 2013) | Adjustments | Pro Forma | ||||||||||
Successor | |||||||||||||
Revenues | $ | 46,729 | $ | 55,052 | $ | — | $ | 101,781 | |||||
Cost of goods sold | 17,367 | 42,770 | (3,077 | ) | (a) | 60,129 | |||||||
1,064 | (b) | ||||||||||||
2,005 | (c) | ||||||||||||
Gross profit | 29,362 | 12,282 | 8 | 41,652 | |||||||||
Operating expenses | |||||||||||||
General and administrative | 6,566 | 5,993 | (117 | ) | (d) | 7,667 | |||||||
(4,775 | ) | (i) | |||||||||||
Exploration expense | 46 | — | — | 46 | |||||||||
Accretion of asset retirement obligation | 59 | — | — | 59 | |||||||||
Total operating expenses | 6,671 | 5,993 | (4,892 | ) | 7,772 | ||||||||
Income from operations | 22,691 | 6,289 | 4,900 | 33,880 | |||||||||
Other (income) expenses | |||||||||||||
Income from preferred interest in Hi-Crush Augusta LLC | (3,750 | ) | — | — | (3,750 | ) | |||||||
Interest expense | 977 | 112 | (120 | ) | (e) | 2,315 | |||||||
1,346 | (f) | ||||||||||||
Total other (income) expenses | (2,773 | ) | 112 | 1,226 | (1,435 | ) | |||||||
Net income | $ | 25,464 | $ | 6,177 | $ | 3,674 | $ | 35,315 | |||||
Calculation of net income per limited partner unit: | |||||||||||||
Limited partners' interest in net income | $ | 35,315 | |||||||||||
Net income per common unit - basic and diluted | $ | 1.22 | |||||||||||
Net income per subordinated unit - basic and diluted | $ | 1.22 | |||||||||||
Weighted average number of common units outstanding - basic and diluted | 15,223,935 | ||||||||||||
Weighted average number of subordinated units - basic and diluted | 13,640,351 | ||||||||||||
The accompanying notes are an integral part of these unaudited Pro Forma Condensed Combined Statement of Operations
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Hi-Crush Partners LP
Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 2012
(in thousands, expect unit and per unit information)
Hi-Crush Partners LP Historical Pro Forma: | |||||||||||||||||||||||
Period From | Period From | Hi-Crush | |||||||||||||||||||||
August 16 | January 1 | Contribution | Partners LP | D&I | Hi-Crush | ||||||||||||||||||
Through | Through | Pro Forma | Historical | Silica, LLC | Pro Forma | Partners LP | |||||||||||||||||
December 31, 2012 | August 15, 2012 | Adjustments | Pro Forma | Historical | Adjustments | Pro Forma | |||||||||||||||||
Successor | Predecessor | ||||||||||||||||||||||
Revenues | $ | 28,858 | $ | 46,776 | $ | (270 | ) | (g) | $ | 75,364 | $ | 104,122 | $ | — | $ | 179,486 | |||||||
Cost of goods sold | 7,145 | 13,336 | (463 | ) | (g) | 20,018 | 81,949 | (4,832 | ) | (a) | 105,914 | ||||||||||||
2,132 | (b) | ||||||||||||||||||||||
6,647 | (c) | ||||||||||||||||||||||
Gross profit | 21,713 | 33,440 | 193 | 55,346 | 22,173 | (3,947 | ) | 73,572 | |||||||||||||||
Operating expenses | |||||||||||||||||||||||
General and administrative | 2,795 | 4,631 | (2,426 | ) | (g) | 5,000 | 3,697 | (239 | ) | (d) | 8,458 | ||||||||||||
Exploration expense | 91 | 539 | (523 | ) | (g) | 107 | — | — | 107 | ||||||||||||||
Accretion of asset retirement obligation | 56 | 16 | — | 72 | — | — | 72 | ||||||||||||||||
Total operating expenses | 2,942 | 5,186 | (2,949 | ) | 5,179 | 3,697 | (239 | ) | 8,637 | ||||||||||||||
Income from operations | 18,771 | 28,254 | 3,142 | 50,167 | 18,476 | (3,708 | ) | 64,935 | |||||||||||||||
Other (income) expenses | |||||||||||||||||||||||
Other (income) expense | — | (6 | ) | 6 | (h) | — | (483 | ) | — | (483 | ) | ||||||||||||
Interest expense | 263 | 3,240 | (3,240 | ) | (h) | 263 | 139 | (139 | ) | (e) | 2,963 | ||||||||||||
2,700 | (f) | ||||||||||||||||||||||
Total other (income) expenses | 263 | 3,234 | (3,234 | ) | 263 | (344 | ) | 2,561 | 2,480 | ||||||||||||||
Net income | $ | 18,508 | $ | 25,020 | $ | 6,376 | $ | 49,904 | $ | 18,820 | $ | (6,269 | ) | $ | 62,455 | ||||||||
Calculation of net income per limited partner unit: | |||||||||||||||||||||||
Limited partners' interest in net income | $ | 62,455 | |||||||||||||||||||||
Net income per common unit - basic and diluted | $ | 2.16 | |||||||||||||||||||||
Net income per subordinated unit - basic and diluted | $ | 2.16 | |||||||||||||||||||||
Weighted average number of common units outstanding - basic and diluted | 15,219,298 | ||||||||||||||||||||||
Weighted average number of subordinated units - basic and diluted | 13,640,351 | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited Pro Forma Condensed Combined Statement of Operations
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Hi-Crush Partners LP
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations
(Dollars in thousands, except as otherwise noted)
Note 1-Basis of Pro Forma Presentation
The Partnership is a Delaware limited partnership formed on May 8, 2012 to acquire selected sand reserves and related processing and transportation facilities of Hi-Crush Proppants LLC (the “Sponsor”). In connection with its formation, the Partnership issued (a) a non-economic general partner interest to Hi-Crush GP LLC (the “General Partner”), and (b) a 100.0% limited partner interest to the Sponsor, its organizational limited partner.
Through August 15, 2012, our Sponsor owned 100% of the sand reserves and related excavation and processing facilities located in Wyeville, Wisconsin. On August 16, 2012, the Sponsor contributed its ownership of Hi-Crush Chambers LLC, Hi-Crush Railroad LLC, Hi-Crush Wyeville LLC, Hi-Crush Operating LLC and $4,606 of cash to the Partnership (the “Contribution”). In addition, the Sponsor agreed to (1) convert all $23,916 of consolidated net intercompany receivables due from the Partnership into capital and (2) assume via capital contribution $10,028 of outstanding accounts payable maintained by Hi-Crush Operating LLC as of the transaction date. In return, the Partnership issued 13,640,351 common units and 13,640,351 subordinated units to the Sponsor. In connection with this transaction, the Partnership also completed an initial public offering through the sale of 12,937,500 of the Partnership's common units by the Sponsor.
The Partnership considered all contributed assets to be under common control with the Sponsor. As such, we have presented the consolidated historical financial statements of the Sponsor as our historical financial statements as we believe they provide a representation of our management's ability to execute and manage our business plan. The financial statement data and operations of the Sponsor are referred to herein as “Predecessor,” whereas operations following the initial public offering on August 16, 2012 are referred to herein as “Successor.”
On June 10, 2013, the Partnership acquired an independent frac sand supplier, D&I, transforming the Partnership into an integrated Northern White frac sand producer, transporter, marketer and distributor. The Partnership acquired D&I for $95,481 in cash and 1,578,947 common units. The total preliminary purchase price of $132,839 is subject to a working capital adjustment. Founded in 2006, D&I is the largest independent frac sand supplier to the oil and gas industry drilling in the Marcellus and Utica shales. D&I operates through an extensive logistics network of rail-served origin and destination terminals located in the Midwest near supply sources and strategically throughout Pennsylvania, Ohio and New York, respectively.
The unaudited pro forma condensed combined statements of operations of the Partnership are based on the unaudited historical consolidated statements of operations of the Partnership for the six months ended June 30, 2013 and the audited historical consolidated statement of operations of the Partnership for the year ended December 31, 2012 and includes pro forma adjustments to give effect to the acquisition as described below as if it occurred on January 1, 2012.
The unaudited pro forma condensed consolidated statements of operations give effect to the acquisition as follows:
• | The addition of D&I's assets, liabilities and related operations to the Partnership, including the impact of purchase accounting adjustments; |
• | The acquisition price, including the cash and unit based consideration of 1,578,947 common units in the Partnership; |
• | The presentation of the Contribution as if took place on January 1, 2012; and |
• | Borrowings under the $200,000 revolver at LIBOR plus 2.5%. Pro forma interest expense has been determined based on an assumed LIBOR of 0.2%. |
No amounts have been included in the purchase price allocation for estimated costs to be incurred to achieve savings or other benefits of the transactions. Similarly, the pro forma statement of operations does not reflect any cost savings or other benefits that may be obtained through synergies among the operations of the Partnership and D&I.
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Hi-Crush Partners LP
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations
(Dollars in thousands, except as otherwise noted)
Note 2-Purchase Price Allocation of D&I Acquisition
The acquisition was accounted for under the acquisition method of accounting whereby management utilized the services of third-party valuation consultants to estimate the fair value of D&I's net assets. The Partnership's unaudited condensed consolidated balance sheet as of June 30, 2013 reflects the preliminary purchase price allocations based on available information. Management is reviewing the valuation and confirming the results to determine the final purchase price allocations, which are expected to be completed in the third quarter of 2013. The recognition of additional long-lived assets acquired or liabilities assumed may be identified as management completes its analysis and additional information is obtained about the facts and circumstances existing as of the acquisition date. In addition, we are still in the process of identifying the reporting units associated with the goodwill and intangible assets arising from the acquisition.
The total preliminary purchase price of $132,839 is subject to a working capital adjustment, and was preliminarily allocated to the net assets acquired as follows:
Assets acquired: | |||
Cash | $ | 204 | |
Restricted cash | 688 | ||
Accounts receivable | 17,908 | ||
Inventories | 10,372 | ||
Prepaid expenses and other current assets | 809 | ||
Property, plant and equipment | 39,242 | ||
Intangible assets | 41,878 | ||
Goodwill | 33,109 | ||
Other assets | 113 | ||
Total assets acquired | 144,323 | ||
Liabilities assumed: | |||
Accounts payable | 10,714 | ||
Accrued liabilities and other current liabilities | 770 | ||
Total liabilities assumed | 11,484 | ||
Fair value of net assets acquired | $ | 132,839 | |
The purchase price allocation is preliminary due to the continuing analyses relating to the determination of the fair values of the assets acquired and the liabilities assumed. Any changes to the fair value of net assets acquired, based on information as of the acquisition date, would result in a corresponding adjustment to goodwill. Management does not expect the finalization of these matters to have a material effect on the allocation.
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Hi-Crush Partners LP
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations
(Dollars in thousands, except as otherwise noted)
Note 3-Pro Forma Adjustments and Assumptions
The unaudited pro forma condensed combined statement of operations has been prepared to reflect the acquisition of D&I by the Partnership and the related financing as if it had occurred January 1, 2012. Pro forma adjustments included in the unaudited pro forma condensed combined statements of operations were as follows:
(a) | To eliminate D&I historical cost basis depreciation and amortization. Prior to its acquisition, D&I depreciated its fixed assets using the straight-line or double declining method. |
(b) | To recognize pro forma depreciation expense on D&I property and equipment based upon the preliminary values assigned in the Partnership's accounting for the purchase of D&I, reflecting an estimated average remaining useful life of 18 years. |
(c) | To recognize pro forma amortization expense on D&I intangible assets based upon the preliminary values assigned in the Partnership's accounting for the purchase of D&I, reflecting an estimated average remaining useful life of 13 years. |
(d) | To eliminate compensation paid to a former member of D&I under an agreement which was terminated in connection with the acquisition. |
(e) | To eliminate interest expense incurred by D&I on debt retained by the sellers. |
(f) | To recognize pro forma interest expense at 2.7% per annum on $100,000 of new borrowings used by the Partnership to finance the acquisition. |
(g) | To eliminate revenues, cost of sales, general and administrative and exploration expenses attributable to entities retained by our Sponsor in connection with our initial public offering on August 15, 2012. |
(h) | To eliminate other income and interest expense incurred by our Sponsor through August 15, 2012. Such amounts were not attributable to the entities contributed to the Partnership in connection with our initial public offering on August 15, 2012. |
(i) | To eliminate costs incurred by D&I and the Partnership in connection with the June 10, 2013 acquisition. |
Note 4-Pro Forma Net Income Per Limited Partner Unit
Pro forma net income per limited partner unit is determined by dividing the pro forma net income available to the limited partners by the number of common units and subordinated units that would have been outstanding as if the acquisition had taken place on January 1, 2012. All units were assumed to have been outstanding during the entire periods presented, as if the Contribution and acquisition of D&I took place on January 1, 2012. Basic and diluted pro forma net income per unit are equivalent because there were no dilutive units outstanding during any such periods.
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