Today, Cypress Environmental Partners, L.P., (NYSE: CELP)
reported its financial results for the three months ended June 30,
2020.
HIGHLIGHTS
- Net loss attributable to common unitholders of $1.3 million for
the three months ended June 30, 2020.
- Distributable cash flow (DCF) of $0.3 million for the three
months ended June 30, 2020.
- Second quarter 2020 Adjusted EBITDA of $3.1 million, an
increase of 17% over first quarter 2020.
- Second quarter 2020 Pipeline Inspection Services segment gross
margin of $4.4 million, a decrease of 31% from first quarter
2020.
- Second quarter 2020 Pipeline & Process Services segment
gross margin increased 276% from first quarter 2020, and 56% from
second quarter 2019, driven by increased activity levels and
backlog.
- Second quarter 2020 Water & Environmental Services segment
gross margin of $0.8 million, a 17% decrease from first quarter
2020.
- Temporarily suspended our common unit distribution to protect
our balance sheet and liquidity and completed cost reductions
representing over $4.5 million of annual savings.
- Paid down debt on our credit facility and exited the second
quarter with approximately $27.8 million of cash and cash
equivalents.
- Started a new service line to offer corrosion inspection
services, nondestructive examination, and related support services
to the municipal water and the offshore energy markets.
SECOND QUARTER 2020 SUMMARY FINANCIAL RESULTS
Three Months Ended
June 30,
2020
2019
(Unaudited)
(in thousands, except per unit
amounts)
Net income
$
381
$
5,643
Net (loss) income attributable to common
unitholders
$
(1,349)
$
4,333
Net (loss) income per limited partner unit
- basic
$
(0.11)
$
0.36
Net (loss) income per limited partner unit
- diluted
$
(0.11)
$
0.29
Adjusted EBITDA(1)
$
3,121
$
9,154
Distributable cash flow(1)
$
255
$
5,237
(1) This press release includes the following financial measures
not presented in accordance with U.S. generally accepted accounting
principles, or GAAP: adjusted EBITDA, adjusted EBITDA attributable
to limited partners, and distributable cash flow. Each such
non-GAAP financial measure is defined below under “Non-GAAP
Financial Information”, and each is reconciled to its most directly
comparable GAAP financial measure in schedules at the end of this
press release.
CEO'S PERSPECTIVE
“The second wave of virus cases, the reinstitution of select
lockdowns, and the risk of lingering high unemployment creates an
uncertain economic environment that likely persists through the
rest of 2020 and until a vaccine is discovered. This pandemic is
adversely impacting the energy industry, demand, prices, our
customers, and in turn us. Given these factors, we are preparing
for potential future volatility, while also focusing on
structurally reducing our cost base and implementing several
strategic initiatives across our companies. As a result, we took
the necessary action to temporarily suspend our common unit
distributions until our operating results improve. Our primary
focus continues to be the health and safety of our employees and
our operations during this unprecedented and dynamic environment,"
said Peter C. Boylan III, chairman, president, and CEO. “Our
talented team delivered better than expected second quarter
performance as a result of increased activity in our Pipeline &
Process Services segment, early and decisive actions focused on
cost reductions, and our commitment to operational excellence and
safely serving our customers. We remain confident in our ability to
navigate this challenging environment while maintaining our
liquidity, culture, and safely providing excellent service to our
valued customers."
GROWTH UPDATE
Pipeline Inspection Services
- A new corrosion service line has been started that is led by a
National Association of Corrosion Engineers (“NACE”)-certified
engineer to offer a wide range of inspection, nondestructive
examination, and related services to the municipal water industry
as well as to our energy customers both onshore and offshore.
- The Pipeline Inspection segment has been aggressively pursuing
organic business development (despite the work from home
environment) and has successfully been awarded some new customer
contracts and relationships that should benefit us in the
future.
Pipeline & Process Services (“PPS”)
- The PPS segment is having an excellent year despite the
challenges with COVID; continuing to expand its backlog and
considering adding some new service lines to its current
offerings.
Water & Environmental Services (“W&E”)
- Volumes have improved significantly in the Bakken despite the
rig count declining to 11 rigs, down from 55 in late 2019. The
previous record low during the prior downturn was 22 rigs in May
2016. Operators are slowly returning production after having choked
back wells earlier this year when oil prices collapsed, instead of
selling the oil at such depressed levels.
- A new contract was recently completed with a public energy
company to connect their water pipeline into one of our
facilities.
COMMON UNIT DISTRIBUTIONS
On July 28, 2020, CELP announced that it has temporarily
suspended common unit distributions.
CELP generated distributable cash flow of $0.3 million for the
three months ended June 30, 2020. Common unit distributions were
$2.6 million for the first quarter of 2020.
SECOND QUARTER 2020 OPERATING RESULTS BY BUSINESS
SEGMENT
Pipeline Inspection Services (“PIS”)
PIS segment results for the three months ended June 30, 2020 and
2019 were:
- Revenue - $43.3 million and $104.0 million, respectively.
- Gross Margin - $4.4 million and $11.4 million,
respectively.
Pipeline & Process Services (“PPS”)
PPS segment results for the three months ended June 30, 2020 and
2019 were:
- Revenue - $7.2 million and $4.4 million, respectively.
- Gross Margin - $2.1 million and $1.4 million,
respectively.
Water & Environmental Services (“Environmental”)
Environmental segment results for the three months ended June
30, 2020 and 2019 were:
- Revenue - $1.3 million and $2.7 million, respectively.
- Gross Margin - $0.8 million and $2.0 million, respectively
CAPITALIZATION, LIQUIDITY, AND FINANCING
Credit Facility
CELP has a $110 million revolving credit facility. Proceeds from
this facility can be used to fund working capital requirements and
other general partnership purposes, including growth and
acquisitions. CELP had $27.8 million of cash and cash equivalents
at June 30, 2020.
- The credit facility matures on May 28, 2021. CELP is working
with the agent and lenders regarding both a renewal and the
possibility of utilizing one of the new US Federal Reserve Main
Street Lending facilities.
- As of June 30, 2020, CELP had $81.7 million of debt outstanding
(inclusive of finance leases). At June 30, 2020, CELP's leverage
ratio was 2.3 times on a net debt basis. The effective interest
rate on CELP's debt as of June 30, 2020 was 3.7%.
CAPITAL EXPENDITURES
During the six months ended June 30, 2020, CELP had growth
capital expenditures totaling $1.1 million and maintenance capital
expenditures totaling $0.4 million that are reflective of our
business model that allows us to generate attractive free cash flow
with minimal capital expenditures.
QUARTERLY REPORT
CELP filed its quarterly report on Form 10-Q for the three
months ended June 30, 2020 with the Securities and Exchange
Commission today. CELP will also post a copy of the Form 10-Q on
its website at www.cypressenvironmental.biz. Unitholders may
request a printed copy of CELP’s complete audited financial
statements and annual report for the year ended December 31, 2019
free of charge by contacting CELP at the email address below.
NON-GAAP FINANCIAL INFORMATION
This press release and the accompanying financial schedules
include the following non-GAAP financial measures: adjusted EBITDA,
adjusted EBITDA attributable to limited partners, and distributable
cash flow. The accompanying schedules provide reconciliations of
these non-GAAP financial measures to their most directly comparable
GAAP financial measures. CELP's non-GAAP financial measures should
not be considered in isolation or as an alternative to its
financial measures presented in accordance with GAAP, including
revenues, net income or loss attributable to limited partners, net
cash provided by or used in operating activities, or any other
measure of liquidity or financial performance presented in
accordance with GAAP as a measure of operating performance,
liquidity, or ability to service debt obligations and make cash
distributions to unitholders. The non-GAAP financial measures
presented by CELP may not be comparable to similarly-titled
measures of other entities because other entities may not calculate
their measures in the same manner.
CELP defines adjusted EBITDA as net income or loss exclusive of
(i) interest expense, (ii) depreciation, amortization, and
accretion expense, (iii) income tax expense or benefit, (iv)
equity-based compensation expense, (v) and certain other unusual or
nonrecurring items. CELP defines adjusted EBITDA attributable to
limited partners as adjusted EBITDA exclusive of amounts
attributable to the general partner and to noncontrolling
interests. CELP defines distributable cash flow as adjusted EBITDA
attributable to limited partners less cash interest paid, cash
income taxes paid, maintenance capital expenditures, and cash
distributions on preferred equity. Management believes these
measures provide investors meaningful insight into results from
ongoing operations.
These non-GAAP financial measures are used as supplemental
liquidity and performance measures by CELP's management and by
external users of its financial statements, such as investors,
commercial banks, research analysts, and others to assess:
- financial performance of CELP without regard to financing
methods, capital structure or historical cost basis of assets;
- CELP's operating performance and return on capital as compared
to those of other companies, without regard to financing methods or
capital structure;
- viability and performance of acquisitions and capital
expenditure projects and the overall rates of return on investment
opportunities; and
- the ability of CELP's businesses to generate sufficient cash to
pay interest costs, support its indebtedness, and make cash
distributions to its unitholders.
ABOUT CYPRESS ENVIRONMENTAL PARTNERS, L.P.
Cypress Environmental Partners, L.P. is a master limited
partnership that provides essential environmental services to the
energy and municipal water industries, including pipeline &
infrastructure inspection, NDE testing, various integrity services,
and pipeline & process services throughout the United States.
Cypress also provides environmental services to upstream energy
companies and their vendors in North Dakota, including water
treatment, hydrocarbon recovery, and disposal into EPA Class II
injection wells to protect our groundwater. Cypress works closely
with its customers to help them protect people, property, and the
environment, and to assist their compliance with increasingly
complex and strict rules and regulations. Cypress is headquartered
in Tulsa, Oklahoma.
CAUTIONARY STATEMENTS
This press release may contain or incorporate by reference
forward-looking statements as defined under the federal securities
laws regarding Cypress Environmental Partners, L.P., including
projections, estimates, forecasts, plans and objectives. Although
management believes that expectations reflected in such
forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to be correct. In addition,
these statements are subject to certain risks, uncertainties and
other assumptions that are difficult to predict and may be beyond
CELP's control. If any of these risks or uncertainties materialize,
or if underlying assumptions prove incorrect, CELP's actual results
may vary materially from what management forecasted, anticipated,
estimated, projected or expected.
The key risk factors that may have a direct bearing on CELP's
results of operations and financial condition are described in
detail in the "Risk Factors" section of CELP's most recently filed
annual report and subsequently filed quarterly reports with the
Securities and Exchange Commission. Investors are encouraged to
closely consider the disclosures and risk factors contained in
CELP's annual and quarterly reports filed from time to time with
the Securities and Exchange Commission. The forward-looking
statements contained herein speak as of the date of this
announcement. CELP undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable securities laws. Information contained in this press
release is unaudited and subject to change.
CYPRESS ENVIRONMENTAL
PARTNERS, L.P.
Unaudited Condensed
Consolidated Balance Sheets
As of June 30, 2020 and
December 31, 2019
(in thousands)
June 30,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
27,761
$
15,700
Trade accounts receivable, net
35,008
52,524
Prepaid expenses and other
1,704
988
Total current assets
64,473
69,212
Property and equipment:
Property and equipment, at cost
26,903
26,499
Less: Accumulated depreciation
15,082
13,738
Total property and equipment, net
11,821
12,761
Intangible assets, net
18,719
20,063
Goodwill
50,287
50,356
Finance lease right-of-use assets, net
749
600
Operating lease right-of-use assets
2,207
2,942
Debt issuance costs, net
532
803
Other assets
588
605
Total assets
$
149,376
$
157,342
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable
$
3,594
$
3,529
Accounts payable - affiliates
141
1,167
Accrued payroll and other
9,813
14,850
Income taxes payable
1,385
1,092
Finance lease obligations
249
183
Operating lease obligations
421
459
Current portion of long-term debt
81,029
-
Total current liabilities
96,632
21,280
Long-term debt
-
74,929
Finance lease obligations
423
359
Operating lease obligations
1,717
2,425
Other noncurrent liabilities
169
158
Total liabilities
98,941
99,151
Owners' equity:
Partners’ capital:
Common units (12,209 and 12,068 units
outstanding at
June 30, 2020 and December 31, 2019,
respectively)
29,445
37,334
Preferred units (5,769 units outstanding
at June 30, 2020 and December 31, 2019)
44,291
44,291
General partner
(25,876
)
(25,876
)
Accumulated other comprehensive loss
(2,368
)
(2,577
)
Total partners' capital
45,492
53,172
Noncontrolling interests
4,943
5,019
Total owners' equity
50,435
58,191
Total liabilities and owners' equity
$
149,376
$
157,342
CYPRESS ENVIRONMENTAL
PARTNERS, L.P.
Unaudited Condensed
Consolidated Statements of Operations
For the Three and Six Months
Ended June 30, 2020 and 2019
(in thousands, except per unit
data)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenue
$
51,688
$
111,091
$
120,171
$
201,467
Costs of services
44,307
96,284
104,835
176,637
Gross margin
7,381
14,807
15,336
24,830
Operating costs and expense:
General and administrative
4,926
6,158
10,866
12,389
Depreciation, amortization and
accretion
1,211
1,109
2,419
2,213
Gain on asset disposals, net
(11
)
(2
)
(23
)
(23
)
Operating income
1,255
7,542
2,074
10,251
Other (expense) income:
Interest expense, net
(1,152
)
(1,415
)
(2,276
)
(2,726
)
Foreign currency gains (losses)
184
84
(273
)
185
Other, net
165
50
270
138
Net income (loss) before income tax
expense
452
6,261
(205
)
7,848
Income tax expense
71
618
291
824
Net income (loss)
381
5,643
(496
)
7,024
Net income attributable to noncontrolling
interests
697
277
609
58
Net (loss) income attributable to partners
/ controlling interests
(316
)
5,366
(1,105
)
6,966
Net income attributable to preferred
unitholder
1,033
1,033
2,066
2,066
Net (loss) income attributable to common
unitholders
$
(1,349
)
$
4,333
$
(3,171
)
$
4,900
Net (loss) income per common limited
partner unit:
Basic
$
(0.11
)
$
0.36
$
(0.26
)
$
0.41
Diluted
$
(0.11
)
$
0.29
$
(0.26
)
$
0.38
Weighted average common units
outstanding:
Basic
12,209
12,053
12,153
12,012
Diluted
12,209
18,218
12,153
18,163
Reconciliation of Net Income (Loss) to
Adjusted EBITDA and Distributable Cash Flow
Three Months ended June
30,
Six Months ended June
30,
2020
2019
2020
2019
(in thousands)
Net income (loss)
$
381
$
5,643
$
(496
)
$
7,024
Add:
Interest expense
1,152
1,415
2,276
2,726
Depreciation, amortization and
accretion
1,447
1,388
2,927
2,764
Income tax expense
71
618
291
824
Equity-based compensation
254
174
518
443
Foreign currency losses
-
-
273
-
Less:
Foreign currency gains
184
84
-
185
Adjusted EBITDA
$
3,121
$
9,154
$
5,789
$
13,596
Adjusted EBITDA attributable to
noncontrolling interests
844
420
906
331
Adjusted EBITDA attributable to limited
partners / controlling interests
$
2,277
$
8,734
$
4,883
$
13,265
Less:
Preferred unit distributions
1,033
1,033
2,066
2,066
Cash interest paid, cash taxes paid, and
maintenance capital expenditures
attributable to limited partners
989
2,464
2,194
3,682
Distributable cash flow
$
255
$
5,237
$
623
$
7,517
Reconciliation of Net (Loss) Income
Attributable to Limited Partners to Adjusted
EBITDA Attributable to Limited Partners
and Distributable Cash Flow
Three Months ended June
30,
Six Months ended June
30,
2020
2019
2020
2019
(in thousands)
Net (loss) income attributable to limited
partners
$
(316
)
$
5,366
$
(1,105
)
$
6,966
Add:
Interest expense attributable to limited
partners
1,152
1,415
2,276
2,726
Depreciation, amortization and accretion
attributable to limited partners
1,318
1,255
2,653
2,504
Income tax expense attributable to limited
partners
53
608
268
811
Equity based compensation attributable to
limited partners
254
174
518
443
Foreign currency losses attributable to
limited partners
-
-
273
-
Less:
Foreign currency gains attributable to
limited partners
184
84
-
185
Adjusted EBITDA attributable to limited
partners
2,277
8,734
4,883
13,265
Less:
Preferred unit distributions
1,033
1,033
2,066
2,066
Cash interest paid, cash taxes paid, and
maintenance capital expenditures
attributable to limited partners
989
2,464
2,194
3,682
Distributable cash flow
$
255
$
5,237
$
623
$
7,517
Reconciliation of Net Cash Flows
Provided by (Used In) Operating
Activities to Adjusted EBITDA and
Distributable Cash Flow
Six Months ended June
30,
2020
2019
(in thousands)
Cash flows provided by (used in) operating
activities
$
15,432
$
(9,040
)
Changes in trade accounts receivable,
net
(17,516
)
25,595
Changes in prepaid expenses and other
734
(128
)
Changes in accounts payable and accrued
liabilities
5,152
(6,358
)
Change in income taxes payable
(292
)
252
Interest expense (excluding non-cash
interest)
1,987
2,465
Income tax expense (excluding deferred tax
benefit)
291
824
Other
1
(14
)
Adjusted EBITDA
$
5,789
$
13,596
Adjusted EBITDA attributable to
noncontrolling interests
906
331
Adjusted EBITDA attributable to limited
partners / controlling interests
$
4,883
$
13,265
Less:
Preferred unit distributions
2,066
2,066
Cash interest paid, cash taxes paid, and
maintenance capital expenditures
attributable to limited partners
2,194
3,682
Distributable cash flow
$
623
$
7,517
Operating Data
Three Months
Six Months
Ended June 30,
Ended June 30,
2020
2019
2020
2019
Total barrels of water processed (in
thousands)
1,769
3,518
4,091
6,333
Average revenue per barrel
$
0.72
$
0.77
$
0.72
$
0.77
Environmental Services gross margins
66.3
%
74.3
%
63.5
%
69.8
%
Average number of inspectors
700
1,673
858
1,553
Average number of U.S. inspectors
700
1,669
858
1,545
Average revenue per inspector per week
$
4,754
$
4,782
$
4,830
$
4,737
Pipeline Inspection Services gross
margins
10.2
%
11.0
%
10.1
%
10.4
%
Average number of field personnel
27
29
27
28
Average revenue per field personnel per
week
$
20,379
$
11,621
$
14,431
$
8,778
Pipeline & Pipeline Services gross
margins
29.5
%
30.9
%
26.5
%
25.3
%
Capital expenditures including finance
lease payments (in thousands)
$
357
$
708
$
1,497
$
1,061
Common unit distributions (in
thousands)
$
-
$
2,531
$
2,564
$
5,062
Preferred unit distributions (in
thousands)
$
1,033
$
1,033
$
2,066
$
2,066
Net debt leverage ratio
2.28x
2.85x
2.28x
2.85x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200813005796/en/
Investors or Analysts: Contact: Cypress Environmental
Partners, L.P. - Jeff Herbers – Vice President & Chief
Financial Officer jeff.herbers@cypressenvironmental.biz or
918-947-5730
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