Attached files
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| 8-K - FORM 8-K - Enservco Corp | ensv20200831_8k.htm |
Exhibit 99.1
Enservco Reports 2020 Second Quarter and Six-Month Financial Results
Company Updates Investors on Progress Toward Refinancing Debt, Including Recent East West Bank Grant of 45 Day Extension to Senior Secured Revolving Credit Facility
Chairman Rich Murphy’s Investment Fund Plans to Convert Approximately $1.5 Million of Subordinated Debt into Enservco Common Stock
DENVER, Aug. 14, 2020 (GLOBE NEWSWIRE) -- Enservco Corporation (NYSE American: ENSV), a diversified national provider of specialized well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its second quarter and six-month period ended June 30, 2020.
“As expected, second quarter results reflected reduced customer activity due to lower commodity prices and the economic slowdown related to the COVID-19 pandemic. We have taken decisive steps to bring our cost structure in line with lower revenue levels and year to date have taken more than $4.0 million in annualized costs out of the business,” said Rich Murphy, chairman and acting CEO. “The slowdown has continued into the third quarter, but we are now preparing for an expected increase in customer activity in our upcoming heating season and have taken advantage of the downturn to redeploy assets to stronger markets. Consequently, we are well positioned to meet demand from our customer base.
“We continue our efforts to refinance our bank debt in seeking to strengthen our balance sheet,” Murphy added. “We have been working diligently with East West Bank and potential new funding sources to secure a debt refinancing package that would include a combination of debt and equity with the goal of substantially reducing our overall debt and increasing shareholders’ equity,” Murphy continued. “This refinancing process is ongoing and there is no assurance of a successful outcome. However, we are encouraged by our progress and the effort being invested by all involved parties, including East West Bank, which, in order to support negotiations, on August 10, 2020, granted Enservco a 45-day extension on the maturity date of our senior secured revolving credit facility.
“In addition, in order to increase shareholders’ equity and reduce debt, my investment firm, Cross River Partners, has agreed to convert approximately $1.5 million in subordinated debt and accrued interest into unregistered Enservco common stock at a 50% premium to the August 13, 2020, closing price as agreed with our independent directors.”
Second Quarter Results
Total revenue in the second quarter ended June 30, 2020, was $2.1 million versus $6.3 million in the same quarter last year.
Production services revenue declined to $1.4 million from $3.8 million year over year and generated a segment loss of $431,000 compared to a segment profit of $492,000.
Completion services revenue declined to $758,000 from $2.5 million year over year and generated a segment loss of $758,000 versus a segment loss of $594,000.
Total operating expenses in the second quarter declined to $6.0 million from $9.3 million due to lower costs of providing production and completion services and to the Company’s across the board cost reduction efforts, partially offset by severance costs and fees incurred with the Company’s debt refinancing efforts. In total, the Company has taken approximately $4.0 million in annualized costs out of the business since the first of the year. Sales, general and administrative expense declined to $1.2 million from $1.5 million year over year. Depreciation and amortization expense decreased to $1.3 million from $1.4 million.
Net loss in the second quarter was $4.4 million, or $0.08 per diluted share, versus a net loss of $3.2 million, or $0.06 per diluted share, in the same quarter last year.
Adjusted EBITDA in the second quarter was a negative $2.1 million compared to a negative $1.5 million in the same quarter last year.
Six Month Results
Total revenue for the six-month period ended June 30, 2020, was $11.5 million versus $31.2 million in the same period a year ago.
Production services revenue declined to $4.6 million from $8.0 million year over year and had a segment loss of $723,000 compared to a segment profit of $1.3 million in the prior year.
Completion services revenue declined to $6.9 million from $23.2 million in the same period last year and generated a segment profit of $455,000, down from a segment profit $8.1 million year over year.
Total operating expenses in the first six months of 2020 decreased to $17.7 million from $27.8 million in the same period last year due to lower costs of providing services combined with a sharp reduction in overhead expense, partially offset by severance and debt refinancing costs. Sales, general and administrative expenses decreased slightly year over year to $3.0 million from $3.1 million. Depreciation and amortization expense decreased to $2.7 million from $2.8 million.
Net loss for the six-month period was $7.2 million, or $0.13 per diluted share, compared to net income of $1.1 million, or $0.02 per diluted share, in the prior year period.
Adjusted EBITDA was a negative $2.6 million versus a positive $6.5 million in the prior year.
Enservco used $882,000 in cash from operations compared to $5.9 million net cash provided by operations in the same period in 2019.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 7:00 a.m. Mountain Time (9:00 a.m. Eastern) and will be accessible by dialing 844-369-8770 (862-298-0840 for international callers). No passcode is necessary. A telephonic replay will be available through August 28, 2020, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #35807. 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 until September 14, 2020. The webcast also is available at the following link: https://www.webcaster4.com/Webcast/Page/2228/35807
About Enservco
Through its various operating subsidiaries, Enservco provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating and related services. The Company has a broad geographic footprint covering seven major domestic oil and gas basins and serves customers in Colorado, 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 Enservco’s annual report on Form 10-K for the year ended December 31, 2019, and subsequently filed documents with the SEC. Forward looking statements in this news release that are subject to risk include the Company’s ability to refinance its bank debt, decrease total debt and increase stockholders’ equity; the conversion of Cross River sub debt into equity; and expectations for an increase in customer activity. 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.
Contact:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-880-9000
Email: jay@pfeifferhigh.com
Marjorie Hargrave
Chief Financial Officer
Enservco Corporation
mhargrave@enservco.com
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ENSERVCO CORPORATION |
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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
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(in thousands) |
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For the Three Months Ended |
For the Six Months Ended |
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June 30, |
June 30, |
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2020 |
2019 |
2020 |
2019 |
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Revenues |
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Production services |
$ | 1,383 | $ | 3,835 | $ | 4,585 | $ | 7,951 | ||||||||
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Completion services |
758 | 2,505 | 6,942 | 23,201 | ||||||||||||
| 2,141 | 6,340 | 11,527 | 31,152 | |||||||||||||
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Expenses |
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Production services |
1,814 | 3,343 | 5,308 | 6,689 | ||||||||||||
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Completion services |
1,516 | 3,099 | 6,487 | 15,119 | ||||||||||||
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Sales, general and administrative expenses |
1,247 | 1,458 | 3,009 | 3,060 | ||||||||||||
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Patent litigation and defense costs |
- | 1 | - | 10 | ||||||||||||
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Severance and transition costs |
139 | - | 139 | - | ||||||||||||
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Loss (gain) on disposal of assets |
23 | (4 |
) |
38 | (4 |
) |
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Impairment loss |
- | - | - | 127 | ||||||||||||
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Depreciation and amortization |
1,310 | 1,442 | 2,706 | 2,842 | ||||||||||||
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Total operating expenses |
6,049 | 9,339 | 17,687 | 27,843 | ||||||||||||
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(Loss) income from operations |
(3,908 |
) |
(2,999 |
) |
(6,160 |
) |
3,309 | |||||||||
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Other (expense) income |
||||||||||||||||
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Interest expense |
(547 |
) |
(656 |
) |
(1,188 |
) |
(1,540 |
) |
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Other income |
76 | 1,202 | 96 | 1,137 | ||||||||||||
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Total other (expense) income |
(471 |
) |
546 | (1,092 |
) |
(403 |
) |
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(Loss) income from continuing operations before tax expense |
(4,379 |
) |
(2,453 |
) |
(7,252 |
) |
2,906 | |||||||||
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Income tax expense |
(9 |
) |
(32 |
) |
(9 |
) |
(32 |
) |
||||||||
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(Loss) income from continuing operations |
$ | (4,388 |
) |
$ | (2,485 |
) |
$ | (7,261 |
) |
$ | 2,874 | |||||
|
Income (loss) from discontinued operations (Note 6) |
31 | (724 |
) |
67 | (1,780 |
) |
||||||||||
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Net (loss) income |
$ | (4,357 |
) |
$ | (3,209 |
) |
$ | (7,194 |
) |
$ | 1,094 | |||||
|
(Loss) earnings from continuing operations per common share - basic |
$ | (0.08 |
) |
$ | (0.05 |
) |
$ | (0.13 |
) |
$ | 0.05 | |||||
|
Loss from discontinued operations per common share - basic |
- | (0.01 |
) |
- | (0.03 |
) |
||||||||||
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Net loss per share - basic |
$ | (0.08 |
) |
$ | (0.06 |
) |
$ | (0.13 |
) |
$ | 0.02 | |||||
|
(Loss) earnings from continuing operations per common share - diluted |
$ | (0.08 |
) |
$ | (0.05 |
) |
$ | (0.13 |
) |
$ | 0.05 | |||||
|
Loss from discontinued operations per common share - diluted |
- | (0.01 |
) |
- | (0.03 |
) |
||||||||||
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Net loss per share - diluted |
$ | (0.08 |
) |
$ | (0.06 |
) |
$ | (0.13 |
) |
$ | 0.02 | |||||
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Basic weighted average number of common shares outstanding |
$ | 55,352 | $ | 54,978 | $ | 55,435 | $ | 54,589 | ||||||||
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Add: Dilutive shares assuming exercise of options and warrants |
- | - | - | 1,215 | ||||||||||||
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Diluted weighted average number of common shares outstanding |
$ | 55,352 | $ | 54,978 | $ | 55,435 | $ | 55,804 | ||||||||
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ENSERVCO CORPORATION AND SUBSIDIARIES |
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Calculation of Adjusted EBITDA * |
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For the Three Months Ended |
For the Six Months Ended |
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June 30, |
June 30, |
|||||||||||||||
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2020 |
2019 |
2020 |
2019 |
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EBITDA* |
||||||||||||||||
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Net (loss) income |
$ | (4,357 |
) |
$ | (3,209 |
) |
$ | (7,194 |
) |
$ | 1,094 | |||||
|
Add back (deduct) |
||||||||||||||||
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Interest expense |
547 | 656 | 1,189 | 1,540 | ||||||||||||
|
Provision for income tax expense |
9 | 32 | 9 | 32 | ||||||||||||
|
Depreciation and amortization (including discontinued operations) |
1,317 | 1,736 | 2,719 | 3,419 | ||||||||||||
|
EBITDA* |
(2,484 |
) |
(785 |
) |
(3,277 |
) |
6,085 | |||||||||
|
Add Back (Deduct) |
||||||||||||||||
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Stock-based compensation |
322 | 77 | 361 | 168 | ||||||||||||
|
Severance and transition costs |
139 | - | 139 | - | ||||||||||||
|
Patent litigation and defense costs |
- | 1 | - | 10 | ||||||||||||
|
(Gain) loss on disposal of equipment (including discontinued operations) |
(15 |
) |
12 | (54 |
) |
12 | ||||||||||
|
Impairment loss |
- | - | - | 127 | ||||||||||||
|
One-time software expense |
- | 25 | - | 25 | ||||||||||||
|
Other (income) expense (including discontinued operations) |
(27 |
) |
(1,208 |
) |
252 | (1,144 |
) |
|||||||||
|
EBITDA related to discontinued operations |
1 | 418 | 11 | 1,192 | ||||||||||||
|
Adjusted EBITDA* |
$ | (2,064 |
) |
$ | (1,460 |
) |
$ | (2,568 |
) |
$ | 6,475 | |||||
|
*Note: See below for discussion of the use of non-GAAP financial measurements. |
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Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management’s discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader's understanding of the Company’s financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein. |
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EBITDA is defined as net (loss) income (earnings), before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA excludes stock-based compensation from EBITDA and, when appropriate, other items that management does not utilize in assessing the Company’s ongoing operating performance as set forth in the next paragraph. 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. |
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All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, impairment losses, etc.) or (ii) items that management does not consider to be useful in assessing the Company’s ongoing operating performance (e.g., income taxes, gain or losses on sale of equipment, severance and transition costs, gain on settlement, expenses to consolidate former Adler facilities, patent litigation and defense costs, other expense (income), EBITDA related to discontinued operations, etc.). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company’s ability to generate free cash flow or invest in its business. |
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We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, our fixed charge coverage ratio covenant associated with our Loan and Security Agreement with East West Bank require the use of Adjusted EBITDA in specific calculations. |
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Because not all companies use identical calculations, the Company’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. |
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ENSERVCO CORPORATION |
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Condensed Consolidated Balance Sheets |
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(In thousands) |
|
June 30, |
December 31, |
|||||||
|
|
2020 |
2019 |
||||||
| ASSETS | ||||||||
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Current Assets |
||||||||
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Cash and cash equivalents |
$ | 429 | $ | 663 | ||||
|
Accounts receivable, net |
1,452 | 6,424 | ||||||
|
Prepaid expenses and other current assets |
947 | 1,016 | ||||||
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Inventories |
314 | 398 | ||||||
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Income tax receivable, current |
57 | 43 | ||||||
|
Current assets of discontinued operations |
- | 187 | ||||||
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Total current assets |
3,199 | 8,731 | ||||||
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Property and equipment, net |
23,741 | 26,620 | ||||||
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Goodwill |
546 | 546 | ||||||
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Intangible assets, net |
726 | 828 | ||||||
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Income taxes receivable, noncurrent |
- | 14 | ||||||
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Right-of-use asset - financing, net |
280 | 569 | ||||||
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Right-of-use asset - operating, net |
3,328 | 3,793 | ||||||
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Other assets |
333 | 445 | ||||||
|
Non-current assets of discontinued operations |
816 | 1,430 | ||||||
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TOTAL ASSETS |
$ | 32,969 | $ | 42,976 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
$ | 2,100 | $ | 4,470 | ||||
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Senior revolving credit facility |
31,993 | 33,994 | ||||||
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Subordinated debt |
2,406 | 2,381 | ||||||
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Lease liability - financing, current |
127 | 207 | ||||||
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Lease liability - operating, current |
818 | 848 | ||||||
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Current portion of long-term debt |
148 | 147 | ||||||
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Current liabilities of discontinued operations |
31 | 72 | ||||||
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Total current liabilities |
37,623 | 42,119 | ||||||
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Long-Term Liabilities |
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Senior revolving credit facility |
- | - | ||||||
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Long-term debt, less current portion |
2,088 | 198 | ||||||
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Lease liability - Financing |
106 | 259 | ||||||
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Lease liability - Operating |
2,623 | 3,009 | ||||||
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Other liability |
12 | 33 | ||||||
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Long-term liability of discontinued operations |
21 | 34 | ||||||
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Total long-term liabilities |
4,850 | 3,533 | ||||||
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Total liabilities |
42,473 | 45,652 | ||||||
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Commitments and Contingencies ( Note 10) |
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Stockholders' Deficit |
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Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding |
- | - | ||||||
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Common stock. $.005 par value, 100,000,000 shares authorized, 55,030,663 and 55,642,829 shares issued, respectively; 103,600 shares of treasury stock; and 54,927,063 and 55,539,229 shares outstanding, respectively |
275 | 278 | ||||||
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Additional paid-in capital |
22,435 | 22,066 | ||||||
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Accumulated deficit |
(32,214 |
) |
(25,020 |
) |
||||
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Total stockholders' deficit |
(9,504 |
) |
(2,676 |
) |
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
$ | 32,969 | $ | 42,976 | ||||
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ENSERVCO CORPORATION |
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) |
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For the Six Months Ended |
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June 30, |
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2020 |
2019 |
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OPERATING ACTIVITIES |
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Net (loss) income |
$ | (7,194 |
) |
$ | 1,094 | |||
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Net income (loss) from discontinued operations |
67 | (1,780 |
) |
|||||
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Net (loss) income from continuing operations |
(7,261 |
) |
2,874 | |||||
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Adjustments to reconcile net (loss) income to net cash used in operating activities |
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Depreciation and amortization |
2,706 | 2,842 | ||||||
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Loss (gain) loss on disposal of equipment |
38 | (4 |
) |
|||||
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Gain on Adler settlement |
- | (1,252 |
) |
|||||
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Impairment loss |
- | 127 | ||||||
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Stock-based compensation |
361 | 168 | ||||||
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Amortization of debt issuance costs and discount |
95 | 226 | ||||||
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Provision for bad debt expense |
298 | 3 | ||||||
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Changes in operating assets and liabilities |
- | |||||||
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Accounts receivable |
4,674 | 2,090 | ||||||
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Inventories |
85 | 142 | ||||||
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Prepaid expense and other current assets |
68 | 9 | ||||||
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Income taxes receivable |
(14 |
) |
- | |||||
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Amortization of operating lease assets |
416 | 329 | ||||||
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Other assets |
320 | 138 | ||||||
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Accounts payable and accrued liabilities |
(2,365 |
) |
(413 |
) |
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Operating lease liabilities |
(416 |
) |
(322 |
) |
||||
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Other liabilities |
(21 |
) |
99 | |||||
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Net cash (used in) provided by operating activities - continuing operations |
(1,016 |
) |
7,056 | |||||
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Net cash provided by (used in) operating activities - discontinued operations |
134 | (1,202 |
) |
|||||
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Net cash (used in) provided by operating activities |
(882 |
) |
5,854 | |||||
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INVESTING ACTIVITIES |
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Purchases of property and equipment |
(306 |
) |
(297 |
) |
||||
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Proceeds from insurance claims |
294 | 27 | ||||||
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Proceeds from disposal of equipment |
335 | 219 | ||||||
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Net cash provided by (used in) investing activities - continuing operations |
323 | (51 |
) |
|||||
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Net cash provided by investing activities - discontinued operations |
681 | 490 | ||||||
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Net cash provided by investing activities |
1,004 | 439 | ||||||
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FINANCING ACTIVITIES |
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Net line of credit payments |
(2,001 |
) |
(2,071 |
) |
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Proceeds from PPP loan |
1,940 | - | ||||||
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Repayment of long-term debt |
(49 |
) |
(70 |
) |
||||
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Payments of finance leases |
(245 |
) |
(202 |
) |
||||
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Repayment of note |
- | (3,700 |
) |
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Other financing activities |
- | (1 |
) |
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Net cash used in financing activities - continuing operations |
(355 |
) |
(6,044 |
) |
||||
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Net cash used in financing activities - discontinued operations |
(1 |
) |
- | |||||
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Net Cash used in financing activities |
(356 |
) |
(6,044 |
) |
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Net (Decrease) Increase in Cash and Cash Equivalents |
(234 |
) |
249 | |||||
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Cash and Cash Equivalents, beginning of period |
663 | 257 | ||||||
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Cash and Cash Equivalents, end of period |
$ | 429 | $ | 506 | ||||
