HOUSTON, TX / ACCESSWIRE / August 11, 2020 / Vertex Energy, Inc. (NASDAQ:VTNR), "Vertex" or the "Company"), a leading specialty refiner and marketer of high-quality hydrocarbon products, today announced its financial results for the second quarter of 2020.
MANAGEMENT OUTLOOK
- Marrero and Heartland refineries operated at near peak utilization rates during July 2020
- UMO collections improved to normalized levels in July 2020, due in part to organic growth in 1H20
- Expect to realize $1-2 million of cost reductions during the second half 2020
- Total cash and available liquidity of $19.6 million as of June 30, 2020
For the three months ended June 30, 2020, the Company reported a net loss attributable to Vertex Energy of ($9.0) million, versus a net loss of ($0.4) million, the second quarter 2019. Vertex reported Adjusted EBITDA of ($5.3) million for the second quarter 2020, versus $2.1 million in the prior-year period. The year-over-year decline in net income and Adjusted EBITDA was attributable to extended maintenance at the Marrero, Louisiana refinery and a year-over-year decline in refined product margins, given lower economic activity related to the novel coronavirus (COVID-19). A schedule reconciling the Company's GAAP and non-GAAP financial results, including Adjusted EBITDA, is included later in this release.
STRATEGIC UPDATE
During the second quarter, Vertex quickly adapted to the changing market dynamics resulting from the novel coronavirus. Specifically, management took action to improve feedstock availability, increase refinery utilization, reduce costs and further optimize owned assets.
- Improved feedstock availability. During the first half of 2020, shelter-in-place orders were issued across most U.S. states and municipalities in response to COVID-19, resulting in a material decline in economic activity and travel. This decline in activity resulted in lower availability of used motor oil (UMO), the Company's primary feedstock. To that end, second quarter total collections were 21% below the same period of 2019. In response, management expanded its collection network, helping to increase availability of feedstock to support its refining operations during the first half of 2020.
- Increased refinery utilization. During the second quarter, the Marrero and Heartland refineries operated at 62% and 78% of capacity, respectively. At Marrero, the company conducted 34 days of planned, extended maintenance that concluded in mid-June 2020, which impacted utilization in the period. At Heartland, second quarter utilization rates were impacted by reduced UMO availability. During July 2020, both the Marrero and Heartland refineries operated at levels approaching peak capacity utilization, given increased availability of UMO feedstock.
- Targeted cost reductions. During the second quarter, management implemented a series of cost reductions throughout the organization. These actions included both reductions in contract labor, together with reductions in plant operating costs. Total selling, general and administrative expenses declined nearly 10% in the second quarter, when compared to the first quarter 2020. Management expects to realize approximately $1 to $2 million in additional, annualized cost reductions during the second half of 2020.
- Asset optimization. Vertex continues to evaluate targeted organic growth opportunities designed to improve its utilization of existing, owned assets. During the second quarter, the Company invested in several initiatives designed to grow its market presence as a collector and recycler of used automotive waste streams. The Company expects to provide an update on these activities during the fourth quarter 2020.
- Maintain capital discipline. Given current market volatility, Vertex remains focused on conserving available liquidity to support the long-term growth of the business. As of June 30, 2020, the Company had total cash and available liquidity of $19.6 million, versus $20.2 million as of March 31, 2020. Included in total cash amounts are cash held in the Company's special purpose vehicles (SPVs) relating to its Myrtle Grove and Heartland assets, which are limited to use by each SPV, respectively.
MANAGEMENT COMMENTARY
"As expected, our second quarter performance was impacted by a combination of low UMO availability, extended downtime at our largest refinery and a year-over-year decline in refined product margins, all of which were attributable to the historic disruption caused by the COVID-19 pandemic," stated Benjamin P. Cowart, President and CEO of Vertex. "In response to rapidly changing market dynamics, our management team took decisive action to reduce costs during the second quarter, while maintaining balance sheet discipline to support the long-term growth of our business."
"Business conditions improved during July, as shelter-in-place orders were lifted," continued Cowart. "Since the start of the third quarter, both our Marrero and Heartland refineries have operated near peak utilization, as UMO feedstock availability has returned to near-historical levels. In July, total UMO collections increased by nearly 40% versus June levels."
"During the second quarter, UMO prices were driven to elevated levels, given a lack of feedstock availability," continued Cowart. "Elevated UMO pricing resulted in less favorable product spreads, which impacted our profitability during the second quarter. As economic activity further accelerates and UMO supplies become more readily available, we expect to see a decline in feedstock prices and improved realized margins during the second half of 2020."
BALANCE SHEET
As of June 30, 2020, the Company had total cash and availability on its lending facility of $17.8 million and $1.8 million, respectively.
Vertex had total term debt outstanding of $10.2 million as of June 30, 2020, which included $4.2 million related to funds received under the Paycheck Protection Program (the "PPP") which is part of the recently enacted Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Under the terms of the PPP, the entire balance of the loan may be forgiven to the extent that cash proceeds are used for qualifying expenses. As of the date of this release, the Company has allocated the entirety of PPP funds received toward qualifying expenses.
CONFERENCE CALL AND WEBCAST
A conference call will be held today at 9:00 A.M. ET to review the Company's financial results, discuss recent events and conduct a question-and-answer session.
A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of Vertex's website at www.vertexenergy.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software. To participate in the live teleconference:
Domestic Live: 844-602-0380
To listen to a replay of the teleconference, which will be available through August 18, 2020:
Domestic Replay: 877-481-4010
Conference ID: 36289
ABOUT VERTEX ENERGY
Houston-based Vertex Energy, Inc. (NASDAQ: VTNR) is a specialty refiner of alternative feedstocks and marketer of high-purity petroleum products. Vertex is one of the largest processors of used motor oil in the U.S., with operations located in Houston and Port Arthur (TX), Marrero (LA) and Heartland (OH). Vertex also co-owns a facility, Myrtle Grove, located on a 41-acre industrial complex along the Gulf Coast in Belle Chasse, LA, with existing hydro-processing and plant infrastructure assets, that include nine million gallons of storage. The Company has built a reputation as a key supplier of Group II+ and Group III base oils to the lubricant manufacturing industry throughout North America.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements, including information about management's view of Vertex Energy's future expectations, plans and prospects, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "believes," "hopes," "expects," "intends," "plans," "anticipates," or "may," and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act, and are subject to the safe harbor created by the Act. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of Vertex Energy, its divisions and concepts to be materially different than those expressed or implied in such statements. These risk factors and others are included from time to time in documents Vertex Energy files with the Securities and Exchange Commission, including, but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other unknown or unpredictable factors also could have material adverse effects on Vertex Energy's future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex Energy cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex Energy undertakes no obligation to update these statements after the date of this release, except as required by law, and takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex Energy.
CONTACT
Investor Relations
720.778.2415
[email protected]
VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
June 30, 2020 |
December 31, 2019 |
||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 17,754,312 | $ | 4,099,655 | ||||
|
Restricted cash
|
100,125 | 100,170 | ||||||
|
Accounts receivable, net
|
9,163,208 | 12,138,078 | ||||||
|
Federal income tax receivable
|
- | 68,606 | ||||||
|
Inventory
|
3,812,752 | 6,547,479 | ||||||
|
Prepaid expenses and other current assets
|
2,499,104 | 4,452,920 | ||||||
|
Total current assets
|
33,329,501 | 27,406,908 | ||||||
|
|
||||||||
|
Noncurrent assets
|
||||||||
|
Fixed assets, at cost
|
70,977,927 | 69,469,548 | ||||||
|
Less accumulated depreciation
|
(26,992,136 | ) | (24,708,151 | ) | ||||
|
Fixed assets, net
|
43,985,791 | 44,761,397 | ||||||
|
Finance lease right-of-use assets
|
1,613,661 | 851,570 | ||||||
|
Operating lease right-of use assets
|
34,739,105 | 35,586,885 | ||||||
|
Intangible assets, net
|
10,363,179 | 11,243,800 | ||||||
|
Deferred income taxes
|
- | 68,605 | ||||||
|
Other assets
|
1,219,301 | 840,754 | ||||||
|
TOTAL ASSETS
|
$ | 125,250,538 | $ | 120,759,919 | ||||
|
|
||||||||
|
LIABILITIES, TEMPORARY EQUITY, AND EQUITY
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable
|
$ | 8,373,449 | $ | 7,620,098 | ||||
|
Accrued expenses
|
2,950,439 | 5,016,132 | ||||||
|
Dividends payable
|
360,203 | 389,176 | ||||||
|
Finance lease liability-current
|
450,835 | 217,164 | ||||||
|
Operating lease liability-current
|
6,004,500 | 5,885,304 | ||||||
|
Current portion of long-term debt, net of unamortized finance costs
|
2,814,306 | 2,017,345 | ||||||
|
Derivative commodity liability
|
538,297 | 375,850 | ||||||
|
Revolving note
|
- | 3,276,230 | ||||||
|
Total current liabilities
|
21,492,029 | 24,797,299 | ||||||
|
Long-term liabilities
|
||||||||
|
Long-term debt, net of unamortized finance costs
|
7,440,308 | 12,433,000 | ||||||
|
Finance lease liability-long-term
|
1,103,231 | 610,450 | ||||||
|
Operating lease liability-long-term
|
28,734,605 | 29,701,581 | ||||||
|
Derivative warrant liability
|
381,434 | 1,969,216 | ||||||
|
Total liabilities
|
59,151,607 | 69,511,546 | ||||||
|
COMMITMENTS AND CONTINGENCIES (Note 3)
|
- | - | ||||||
|
|
||||||||
|
TEMPORARY EQUITY
|
||||||||
|
Series B Convertible Preferred Stock, $0.001 par value per share;
10,000,000 shares designated, 3,941,704 and 3,826,055 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively with a liquidation preference of $12,219,282 and $11,860,771 at June 30, 2020 and December 31, 2019, respectively. |
12,219,282 | 11,006,406 | ||||||
|
|
||||||||
|
Series B1 Convertible Preferred Stock, $0.001 par value per share;
17,000,000 shares designated, 7,109,305 and 9,028,085 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively with a liquidation preference of $11,090,516 and $14,083,813 at June 30, 2020 and December 31, 2019, respectively. |
10,366,624 | 12,743,047 | ||||||
|
|
||||||||
|
Redeemable non-controlling interest
|
28,334,401 | 4,396,894 | ||||||
|
Total Temporary Equity
|
50,920,307 | 28,146,347 | ||||||
|
EQUITY
|
||||||||
|
50,000,000 of total Preferred shares authorized:
|
||||||||
|
Series A Convertible Preferred Stock, $0.001 par value;
5,000,000 shares designated, 419,859 shares issued and outstanding at June 30, 2020 and December 31, 2019, with a liquidation preference of $625,590 at June 30, 2020 and December 31, 2019. |
420 | 420 | ||||||
|
|
||||||||
|
Series C Convertible Preferred Stock, $0.001 par value;
44,000 shares designated, no shares issued or outstanding. |
- | - | ||||||
|
|
||||||||
|
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 45,554,841 and 43,395,563 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively. |
45,555 | 43,396 | ||||||
|
Additional paid-in capital
|
94,233,371 | 81,527,351 | ||||||
|
Accumulated deficit
|
(79,979,484 | ) | (59,246,514 | ) | ||||
|
Total Vertex Energy, Inc. stockholders' equity
|
14,299,862 | 22,324,653 | ||||||
|
Non-controlling interest
|
878,762 | 777,373 | ||||||
|
Total Equity
|
15,178,624 | 23,102,026 | ||||||
|
TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY
|
$ | 125,250,538 | $ | 120,759,919 | ||||
VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
|
|
2020 | 2019 | 2020 | 2020 | ||||||||||||
|
Revenues
|
$ | 21,374,127 | $ | 43,657,292 | $ | 57,577,556 | $ | 82,978,004 | ||||||||
|
Cost of revenues (exclusive of depreciation and amortization shown separately below)
|
22,197,805 | 36,515,421 | 49,034,659 | 71,359,770 | ||||||||||||
|
Gross profit (loss)
|
(823,678 | ) | 7,141,871 | 8,542,897 | 11,618,234 | |||||||||||
|
|
||||||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Selling, general and administrative expenses
|
6,030,560 | 6,028,859 | 12,731,078 | 11,376,600 | ||||||||||||
|
Depreciation and amortization
|
1,713,461 | 1,780,890 | 3,348,008 | 3,517,903 | ||||||||||||
|
Total operating expenses
|
7,744,021 | 7,809,749 | 16,079,086 | 14,894,503 | ||||||||||||
|
Loss from operations
|
(8,567,699 | ) | (667,878 | ) | (7,536,189 | ) | (3,276,269 | ) | ||||||||
|
Other income (expense):
|
||||||||||||||||
|
Other income
|
20 | 1,918 | 100 | 1,918 | ||||||||||||
|
Gain on sale of assets
|
12,344 | 29,150 | 12,344 | 31,443 | ||||||||||||
|
Gain (loss) on change in value of derivative warrant liability
|
(110,965 | ) | 746,017 | 1,587,782 | (959,077 | ) | ||||||||||
|
Interest expense
|
(222,173 | ) | (738,972 | ) | (562,259 | ) | (1,496,775 | ) | ||||||||
|
Total other income (expense)
|
(320,774 | ) | 38,113 | 1,037,967 | (2,422,491 | ) | ||||||||||
|
Loss before income tax
|
(8,888,473 | ) | (629,765 | ) | (6,498,222 | ) | (5,698,760 | ) | ||||||||
|
Income tax benefit (expense)
|
- | - | - | - | ||||||||||||
|
Net loss
|
(8,888,473 | ) | (629,765 | ) | (6,498,222 | ) | (5,698,760 | ) | ||||||||
|
Net income (loss) attributable to non-controlling interest and redeemable non-controlling interest
|
109,165 | (202,329 | ) | (289,444 | ) | (307,760 | ) | |||||||||
|
Net loss attributable to Vertex Energy, Inc.
|
(8,997,638 | ) | (427,436 | ) | (6,208,778 | ) | (5,391,000 | ) | ||||||||
|
|
||||||||||||||||
|
Accretion of redeemable noncontrolling interest to redemption value
|
(1,381,889 | ) | - | (12,348,238 | ) | - | ||||||||||
|
Accretion of discount on Series B and B1 Preferred Stock
|
(539,235 | ) | (532,925 | ) | (1,471,238 | ) | (1,093,600 | ) | ||||||||
|
Dividends on Series B and B1 Preferred Stock
|
(360,217 | ) | (412,875 | ) | (704,716 | ) | (819,670 | ) | ||||||||
|
Net loss available to common shareholders
|
$ | (11,278,979 | ) | $ | (1,373,236 | ) | $ | (20,732,970 | ) | $ | (7,304,270 | ) | ||||
|
Loss per common share
|
||||||||||||||||
|
Basic
|
$ | (0.25 | ) | $ | (0.03 | ) | $ | (0.46 | ) | $ | (0.18 | ) | ||||
|
Diluted
|
$ | (0.25 | ) | $ | (0.03 | ) | $ | (0.46 | ) | $ | (0.18 | ) | ||||
|
Shares used in computing earnings per share
|
||||||||||||||||
|
Basic
|
45,554,841 | 40,294,870 | 45,463,600 | 40,245,671 | ||||||||||||
|
Diluted
|
45,554,841 | 40,294,870 | 45,463,600 | 40,245,671 | ||||||||||||
VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(UNAUDITED)
| Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||
|
|
Common Stock | Series A Preferred | Series C Preferred | ||||||||||||||||||||||||||||||||||||||||
|
|
Shares | $0.001 Par | Shares | $0.001 Par | Shares | $0.001 Par | Additional Paid-In Capital | Retained Earnings | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||
|
Balance on January 1, 2020
|
43,395,563 | $ | 43,396 | 419,859 | $ | 420 | - | $ | - | $ | 81,527,351 | $ | (59,246,514 | ) | $ | 777,373 | $ | 23,102,026 | |||||||||||||||||||||||||
|
Purchase of shares of consolidated subsidiary
|
- | - | - | - | - | - | (71,171 | ) | - | - | (71,171 | ) | |||||||||||||||||||||||||||||||
|
Adjustment of carrying mount of non-controlling interest
|
- | - | - | - | - | - | 9,091,068 | - | - | 9,091,068 | |||||||||||||||||||||||||||||||||
|
Share based compensation expense
|
- | - | - | - | - | - | 163,269 | - | - | 163,269 | |||||||||||||||||||||||||||||||||
|
Conversion of Series B1 Preferred stock to common
|
2,159,278 | 2,159 | - | - | - | - | 3,366,315 | - | - | 3,368,474 | |||||||||||||||||||||||||||||||||
|
Dividends on Series B and B1
|
- | - | - | - | - | - | - | (344,499 | ) | - | (344,499 | ) | |||||||||||||||||||||||||||||||
|
Accretion of discount on Series B and B1
|
- | - | - | - | - | - | - | (932,003 | ) | - | (932,003 | ) | |||||||||||||||||||||||||||||||
|
Accretion of redeemable non-controlling interest to redemption value
|
- | - | - | - | - | - | - | (10,966,349 | ) | - | (10,966,349 | ) | |||||||||||||||||||||||||||||||
|
Net income
|
- | - | - | - | - | - | - | 2,788,860 | 119,268 | 2,908,128 | |||||||||||||||||||||||||||||||||
|
Balance on March 31, 2020
|
45,554,841 | $ | 45,555 | 419,859 | $ | 420 | $ | - | $ | - | $ | 94,076,832 | $ | (68,700,505 | ) | $ | 896,641 | $ | 26,318,943 | ||||||||||||||||||||||||
|
Share based compensation expense
|
- | - | - | - | - | - | 156,539 | - | - | 156,539 | |||||||||||||||||||||||||||||||||
|
Dividends on Series B and B1
|
- | - | - | - | - | - | - | (360,217 | ) | - | (360,217 | ) | |||||||||||||||||||||||||||||||
|
Accretion of discount on Series B and B1
|
- | - | - | - | - | - | - | (539,235 | ) | - | (539,235 | ) | |||||||||||||||||||||||||||||||
|
Accretion of redeemable non-controlling interest to redemption value
|
- | - | - | - | - | - | - | (1,381,889 | ) | - | (1,381,889 | ) | |||||||||||||||||||||||||||||||
|
Net loss
|
- | - | - | - | - | - | - | (8,997,638 | ) | (17,879 | ) | (9,015,517 | ) | ||||||||||||||||||||||||||||||
|
Balance on June 30, 2020
|
45,554,841 | $ | 45,555 | 419,859 | $ | 420 | $ | - | $ | - | $ | 94,233,371 | $ | (79,979,484 | ) | $ | 878,762 | $ | 15,178,624 | ||||||||||||||||||||||||
| Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||
|
|
Common Stock | Series A Preferred | Series C Preferred | ||||||||||||||||||||||||||||||||||||||||
|
|
Shares | $0.001 Par | Shares | $0.001 Par | Shares | $0.001 Par | Additional Paid-In Capital | Retained Earnings | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||
|
Balance on January 1, 2019
|
40,174,821 | $ | 40,175 | 419,859 | $ | 420 | - | $ | - | $ | 75,131,122 | $ | (47,800,886 | ) | $ | 1,438,213 | $ | 28,809,044 | |||||||||||||||||||||||||
|
Share based compensation expense
|
- | - | - | - | - | - | 143,063 | - | - | 143,063 | |||||||||||||||||||||||||||||||||
|
Conversion of Series B1 Preferred stock to common
|
96,160 | 96 | - | - | - | - | 149,914 | - | - | 150,010 | |||||||||||||||||||||||||||||||||
|
Dividends on Series B and B1
|
- | - | - | - | - | - | - | (406,795 | ) | - | (406,795 | ) | |||||||||||||||||||||||||||||||
|
Accretion of discount on Series B and B1
|
- | - | - | - | - | - | - | (560,675 | ) | - | (560,675 | ) | |||||||||||||||||||||||||||||||
|
Net loss
|
- | - | - | - | - | - | - | (4,963,564 | ) | (105,431 | ) | (5,068,995 | ) | ||||||||||||||||||||||||||||||
|
Balance on March 31, 2019
|
40,270,981 | $ | 40,271 | 419,859 | $ | 420 | - | $ | - | $ | 75,424,099 | $ | (53,731,920 | ) | $ | 1,332,782 | $ | 23,065,652 | |||||||||||||||||||||||||
|
Exercise of options to common
|
75,925 | 76 | - | - | - | - | 4,424 | - | - | 4,500 | |||||||||||||||||||||||||||||||||
|
Share based compensation expense
|
- | - | - | - | - | - | 171,002 | - | - | 171,002 | |||||||||||||||||||||||||||||||||
|
Distribution to noncontrolling
|
- | - | - | - | - | - | - | - | (285,534 | ) | (285,534 | ) | |||||||||||||||||||||||||||||||
|
Dividends on Series B and B1
|
- | - | - | - | - | - | - | (412,875 | ) | - | (412,875 | ) | |||||||||||||||||||||||||||||||
|
Accretion of discount on Series B and B1
|
- | - | - | - | - | - | - | (532,925 | ) | - | (532,925 | ) | |||||||||||||||||||||||||||||||
|
Net income
|
- | - | - | - | - | - | - | (427,436 | ) | (202,329 | ) | (629,765 | ) | ||||||||||||||||||||||||||||||
|
Balance on June 30, 2019
|
40,346,906 | $ | 40,347 | 419,859 | $ | 420 | - | $ | - | $ | 75,599,525 | $ | (55,105,156 | ) | $ | 844,919 | $ | 21,380,055 | |||||||||||||||||||||||||
VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)
| Six Months Ended | ||||||||
|
|
June 30, 2020 |
June 30, 2019 |
||||||
|
Cash flows from operating activities
|
||||||||
|
Net loss
|
$ | (6,498,222 | ) | $ | (5,698,760 | ) | ||
|
Adjustments to reconcile net loss to cash provided by operating activities
|
||||||||
|
Stock based compensation expense
|
319,809 | 314,065 | ||||||
|
Depreciation and amortization
|
3,348,008 | 3,517,903 | ||||||
|
Gain on sale of assets
|
(12,344 | ) | (31,443 | ) | ||||
|
Contingent consideration reduction
|
- | (15,564 | ) | |||||
|
Bad debt and reduction in allowance for bad debt
|
65,443 | (360,926 | ) | |||||
|
(Decrease) increase in fair value of derivative warrant liability
|
(1,587,782 | ) | 959,077 | |||||
|
(Gain) loss on commodity derivative contracts
|
(4,484,798 | ) | 1,069,778 | |||||
|
Net cash settlements on commodity derivatives
|
4,781,183 | (967,708 | ) | |||||
|
Amortization of debt discount and deferred costs
|
47,826 | 286,954 | ||||||
|
Changes in operating assets and liabilities
|
||||||||
|
Accounts receivable
|
4,986,003 | (2,111,591 | ) | |||||
|
Inventory
|
3,711,239 | 2,338,814 | ||||||
|
Prepaid expenses
|
1,834,361 | 1,948,771 | ||||||
|
Accounts payable
|
(269,740 | ) | (518,050 | ) | ||||
|
Accrued expenses
|
(2,150,272 | ) | (187,349 | ) | ||||
|
Other assets
|
(378,547 | ) | - | |||||
|
Net cash provided by operating activities
|
3,712,167 | 543,971 | ||||||
|
Cash flows from investing activities
|
||||||||
|
Acquisition
|
(1,822,690 | ) | - | |||||
|
Internally developed software
|
(49,229 | ) | - | |||||
|
Purchase of fixed assets
|
(1,526,379 | ) | (2,419,599 | ) | ||||
|
Proceeds from sale of fixed assets
|
22,844 | 86,846 | ||||||
|
Net cash used in investing activities
|
(3,375,454 | ) | (2,332,753 | ) | ||||
|
Cash flows from financing activities
|
||||||||
|
Payments on finance leases
|
(162,312 | ) | (61,638 | ) | ||||
|
Proceeds from exercise of stock options
|
- | 4,500 | ||||||
|
Distribution VRM LA
|
- | (285,534 | ) | |||||
|
Contributions received from redeemable noncontrolling interest
|
21,000,000 | - | ||||||
|
Line of credit (payments) proceeds, net
|
(3,276,230 | ) | 1,235,251 | |||||
|
Proceeds from note payable (includes proceeds from PPP note)
|
4,374,643 | 187,501 | ||||||
|
Payments on note payable
|
(8,618,202 | ) | (1,542,903 | ) | ||||
|
Net cash provided by (used in) financing activities
|
13,317,899 | (462,823 | ) | |||||
|
Net change in cash, cash equivalents and restricted cash
|
13,654,612 | (2,251,605 | ) | |||||
|
Cash, cash equivalents, and restricted cash at beginning of the period
|
4,199,825 | 2,849,831 | ||||||
|
Cash, cash equivalents, and restricted cash at end of period
|
$ | 17,854,437 | $ | 598,226 | ||||
|
|
||||||||
|
SUPPLEMENTAL INFORMATION
|
||||||||
|
Cash paid for interest
|
$ | 562,259 | $ | 1,221,363 | ||||
|
Cash paid for taxes
|
$ | - | $ | - | ||||
|
NON-CASH INVESTING AND FINANCING TRANSACTIONS
|
||||||||
|
Conversion of Series B1 Preferred Stock into common stock
|
$ | 3,368,474 | $ | 150,010 | ||||
|
Accretion of discount on Series B and B1 Preferred Stock
|
$ | 1,471,238 | $ | 1,093,600 | ||||
|
Dividends-in-kind accrued on Series B and B1 Preferred Stock
|
$ | 704,716 | $ | 819,670 | ||||
|
Equipment acquired under finance leases
|
$ | 888,764 | $ | 621,000 | ||||
|
Initial adjustment of carrying amount redeemable noncontrolling interest
|
$ | 9,091,068 | $ | - | ||||
|
Accretion of redeemable noncontrolling interest to redemption value
|
$ | 12,348,238 | $ | - | ||||
Reconciliation of Net Loss attributable to Vertex Energy, Inc., to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA*
| For the Three Months Ended | For the Trailing Twelve Months | |||||||||||||||
|
|
June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
|
|
||||||||||||||||
|
Net income (loss)
|
$ | ( 8,888,473 | ) | $ | (629,765 | ) | $ | (6,285,015 | ) | $ | (8,136,060 | ) | ||||
|
Add (deduct):
|
||||||||||||||||
|
Interest Income
|
(20 | ) | (1,918 | ) | (879 | ) | (1,918 | ) | ||||||||
|
Interest Expense
|
222,173 | 738,972 | 2,135,555 | 3,128,659 | ||||||||||||
|
Depreciation and amortization
|
1,713,461 | 1,780,890 | 7,010,194 | 7,081,738 | ||||||||||||
|
EBITDA
|
(6,952,859) | 1,888,179 | 2,859,855 | 2,072,419 | ||||||||||||
|
|
||||||||||||||||
|
Add (deduct):
|
||||||||||||||||
|
Loss (gain) on change in value of derivative warrant liability
|
110,965 | (746,017 | ) | (2,059,335 | ) | 239,523 | ||||||||||
|
Unrealized (gain) loss on derivative instruments
|
1,344,093 | 558,360 | 429,740 | 61,944 | ||||||||||||
|
Stock-based compensation
|
156,539 | 171,002 | 648,585 | 644,180 | ||||||||||||
|
Adjusted EBITDA *
|
$ | (5,341,262) | $ | 1,871,524 | $ | 1,878,845 | $ | 3,018,066 | ||||||||
|
|
||||||||||||||||
|
Net cash provided by (used in)
operating activities
|
597,159 | 2,520,851 | 5,641,363 | 2,725,294 | ||||||||||||
|
Add (deduct): capital expenditures
|
(1,084,199 | ) | (1,644,702 | ) | (3,014,469 | ) | (3,348,625 | ) | ||||||||
|
Free cash flow
|
(487,040 | ) | 876,149 | 2,626,894 | (623,331 | ) | ||||||||||
|
|
||||||||||||||||
* EBITDA, Adjusted EBITDA, and free cash flows are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.
EBITDA represents net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before stock-based compensation expense and gain (loss) on change in value of derivative warrant liability and unrealized gains and losses on derivative instruments for hedging activities. EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:
- EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs;
- EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
- Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and
- Other companies in this industry may calculate EBITDA and Adjusted EBITDA differently than Vertex Energy does, limiting its usefulness as a comparative measure.
Free cash flow represents net cash provided by (used in) operating activities less capital expenditures.
SOURCE: Vertex Energy, Inc.