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- Revenues of
$162.2 million in 4Q 2018 vs.$214.0 million in 3Q 2018 and$216.5 million in 4Q 2017 - Net loss of
$(9.9) million in 4Q 2018 vs. net income of$27.1 million in 3Q 2018 and$41.9 million in 4Q 2017 - Adjusted EBITDA of
$10.2 million in 4Q 2018 vs.$51.3 million in 3Q 2018 and$57.9 million in 4Q 2017 - Contribution margin per ton of
$14.35 in 4Q 2018 vs.$23.92 in 3Q 2018 and$23.46 in 4Q 2017 - Exited 4Q 2018 with
$114.3 million of cash, no borrowings on ABL facility and total liquidity of$172.5 million - 51% of 4Q 2018 sales volumes sold to E&Ps; executed additional sand supply and last mile service agreements
- Completed construction of second Kermit facility; Wyeville expansion remains on target for 1Q 2019
Earnings before interest, taxes, depreciation and amortization adjusted for earnings from equity method investments and loss on extinguishment of debt ("Adjusted EBITDA") was
"During the fourth quarter, we made significant progress in furthering our relationships with E&Ps and contracting our last mile solutions, while also completing construction on our customer-supported second Kermit facility, on time and under budget," said
Fourth Quarter 2018 Results
Revenues for the fourth quarter of 2018 totaled
Contribution margin was
"Contribution margin per ton was in line with previous guidance, reflecting our relentless focus on cost management and efficiency, which offset the lower capacity utilization we experienced," said Ms.
Full Year 2018 Results
For the full year 2018, the limited partners' interest in net income was
Revenues for the year ended
Average sales price per ton was
Operational Update
At the end of the fourth quarter of 2018,
"Our deployment of PropStream crews in the fourth quarter was impacted by delays in contract start-ups due to budget timing considerations of our customers," Mr. Rasmus continued. "We ended the year with 16 container crews, and 8 FB silo systems deployed, representing significant progress given the slowdown in activity facing the industry, particularly in the fourth quarter. We have contracted additional PropStream crews and systems in the fourth quarter and over the past several weeks, which will be deployed in the first quarter, leading to incremental growth in PropStream contribution to our bottom line. In addition, the completion of field testing of the FB Atlas top-fill conveyor system further differentiates Hi-Crush’s last mile offering versus those services reliant on pneumatic fill solutions.
"We were also pleased to complete construction on our second Kermit facility during the fourth quarter, representing an increase in capacity at our Kermit complex in
The Partnership previously announced the execution of pricing amendments to certain of its sand supply agreements supporting the Kermit complex. Including these amendments, the Partnership expects to generate more than
"We are focused on trading value for value and further strengthening the long-term relationships we target with our E&P customers, and we have been able to achieve this in contract renegotiations for our in-basin sand," said Mr. Rasmus. "We have secured the use of additional PropStream crews and equipment, increased volume commitments and extended terms on contracts, while committing strategically and collaboratively to the long-term success of these relationships."
Liquidity and Capital Expenditures
As of December 31, 2018, the Partnership had
Capital expenditures for the year ended December 31, 2018, totaled
Capital expenditures for the full year 2019 will be comprised of three components. Carryover growth capex from 2018 projects associated with completion of the Kermit construction and Wyeville expansions are expected to be in the range of
"
Corporate Conversion Update
The Partnership filed a preliminary proxy statement with the
"The reasons for the Conversion are numerous, and, as we noted in the preliminary proxy statement, the Board believes the Conversion is critical to the future success of
Distribution
On
Outlook
For the first quarter of 2019, the Partnership expects total sales volumes to be in a range of 2.4 to 2.6 million tons. The forecasted sequential increase is due to additional volumes sold from the second Kermit facility as well as increasing Northern White volumes related to the new E&P contracts previously announced.
"The first quarter of 2019 will be very active for
Conference Call
On Wednesday, February 6, 2019,
Interested parties may also listen to a simultaneous webcast of the conference call by logging onto Hi-Crush’s website at www.hicrush.com under the Investors Relations-Event Calendar and Presentations section. A replay of the webcast will also be available for approximately 30 days following the call. The slide presentation to be referenced on the call will also be on Hi-Crush’s website at www.hicrush.com under the Investors Relations-Event Calendar and Presentations section.
Non-GAAP Financial Measures
This news release and the accompanying schedules include the non-GAAP financial measure of EBITDA, Adjusted EBITDA, distributable cash flow, adjusted earnings per limited partner unit and contribution margin, which may be used periodically by management when discussing our financial results with investors and analysts. The accompanying schedules of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in
We define EBITDA as net income plus depreciation, depletion and amortization and interest expense, net of interest income. We define Adjusted EBITDA as EBITDA, adjusted for any non-cash impairments of long-lived assets and goodwill, earnings (loss) from equity method investments and loss on extinguishment of debt. We define distributable cash flow as Adjusted EBITDA less cash paid for interest expense, including accruals and maintenance and replacement capital expenditures, including accrual for reserve replacement, plus accretion of asset retirement obligations and non-cash unit-based compensation. We use distributable cash flow as a performance metric to compare cash generating performance of the Partnership from period to period and to compare the cash generating performance for specific periods to the cash distributions (if any) that are expected to be paid to our unitholders. Distributable cash flow will not reflect changes in working capital balances. We define adjusted earnings per limited partner unit as earnings per limited partner unit, adjusted for the impact of non-recurring items.
We use contribution margin, which we define as total revenues less costs of goods sold excluding depreciation, depletion and amortization, to measure our financial and operating performance. Contribution margin excludes other operating expenses and income, including costs not directly associated with the operations of our business such as accounting, human resources, information technology, legal, sales and other administrative activities.
EBITDA, Adjusted EBITDA, distributable cash flow, adjusted earnings per limited partner unit and contribution margin are presented as management believes the data provides a measure of operating performance that is unaffected by historical cost basis and provides additional information and metrics relative to the performance of our business.
About
No Solicitation
This communication relates to the Conversion. This communication is for informational purposes only and does not constitute a solicitation of any vote or approval, in any jurisdiction, pursuant to the Conversion or otherwise.
Important Additional Information
In connection with the Conversion, the Partnership has filed with the
Investors and security holders are able to obtain free copies of the proxy statement and all other documents filed or that will be filed with the
Participants in the Solicitation
The Partnership is managed and operated by the board of directors and executive officers of its general partner,
Information regarding our General Partner’s directors and executive officers is contained in the Partnership’s Annual Report on Form 10-K for the 2017 fiscal year filed with the
Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the Conversion by reading the proxy statement regarding the Conversion. You may obtain free copies of this document as described above.
Forward-Looking Statements
Some of the information in this news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements give our current expectations, and contain projections of results of operations or of financial condition, or forecasts of future events. Words such as "may," "should," "assume," "forecast," "position," "predict," "strategy," "expect," "intend," "hope," "plan," "estimate," "anticipate," "could," "believe," "project," "budget," "potential," "likely," or "continue," and similar expressions are used to identify forward-looking statements. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Hi-Crush’s reports filed with the
Investor contact:
Caldwell Bailey, Lead Investor Relations Analyst
ir@hicrush.com
(713) 980-6270
Unaudited Consolidated Statements of Operations | |||||||||||
(Amounts in thousands, except per unit amounts) | |||||||||||
Three Months Ended | |||||||||||
December 31, | September 30, | ||||||||||
2018 | 2017 (a) | 2018 (a) | |||||||||
Revenues | $ | 162,235 | $ | 216,456 | $ | 213,972 | |||||
Cost of goods sold (excluding depreciation, depletion and amortization) | 133,877 | 146,428 | 147,583 | ||||||||
Depreciation, depletion and amortization | 9,762 | 8,220 | 10,241 | ||||||||
Gross profit | 18,596 | 61,808 | 56,148 | ||||||||
Operating costs and expenses: | |||||||||||
General and administrative expenses | 18,582 | 12,023 | 15,634 | ||||||||
Accretion of asset retirement obligations | 125 | 115 | 124 | ||||||||
Other operating expenses | 929 | 522 | 631 | ||||||||
Income (loss) from operations | (1,040 | ) | 49,148 | 39,759 | |||||||
Other income (expense): | |||||||||||
Earnings from equity method investments | 1,250 | 217 | 1,624 | ||||||||
Interest expense | (10,140 | ) | (3,105 | ) | (8,012 | ) | |||||
Loss on extinguishment of debt | — | (4,332 | ) | (6,233 | ) | ||||||
Net income (loss) | $ | (9,930 | ) | $ | 41,928 | $ | 27,138 | ||||
Earnings (loss) per limited partner unit: | |||||||||||
Basic | $ | (0.08 | ) | $ | 0.48 | $ | 0.30 | ||||
Diluted | $ | (0.08 | ) | $ | 0.47 | $ | 0.29 |
Year Ended | |||||||
December 31, | |||||||
2018 | 2017 (a) | ||||||
Revenues | $ | 842,840 | $ | 602,623 | |||
Cost of goods sold (excluding depreciation, depletion and amortization) | 577,974 | 438,348 | |||||
Depreciation, depletion and amortization | 38,284 | 29,449 | |||||
Gross profit | 226,582 | 134,826 | |||||
Operating costs and expenses: | |||||||
General and administrative expenses | 59,328 | 43,667 | |||||
Accretion of asset retirement obligations | 498 | 458 | |||||
Other operating expenses | 2,765 | 865 | |||||
Other operating income | — | (3,554 | ) | ||||
Income from operations | 163,991 | 93,390 | |||||
Other income (expense): | |||||||
Earnings from equity method investments | 5,184 | 75 | |||||
Interest expense | (25,347 | ) | (12,971 | ) | |||
Loss on extinguishment of debt | (6,233 | ) | (4,332 | ) | |||
Net income | $ | 137,595 | $ | 76,162 | |||
Earnings per limited partner unit: | |||||||
Basic | $ | 1.46 | $ | 0.97 | |||
Diluted | $ | 1.42 | $ | 0.96 | |||
(a) Financial information has been recast to include the results attributable to our sponsor and general partner. |
Unaudited EBITDA, Adjusted EBITDA and Distributable Cash Flow | |||||||||||
(Amounts in thousands) | |||||||||||
Three Months Ended | |||||||||||
December 31, | September 30, | ||||||||||
2018 | 2017 | 2018 | |||||||||
Reconciliation of distributable cash flow to net income (loss): | |||||||||||
Net income (loss) | $ | (9,930 | ) | $ | 41,928 | $ | 27,138 | ||||
Depreciation and depletion expense | 9,901 | 8,357 | 10,373 | ||||||||
Amortization expense | 1,318 | 419 | 1,215 | ||||||||
Interest expense | 10,140 | 3,105 | 8,012 | ||||||||
EBITDA | 11,429 | 53,809 | 46,738 | ||||||||
Earnings from equity method investments | (1,250 | ) | (217 | ) | (1,624 | ) | |||||
Loss on extinguishment of debt | — | 4,332 | 6,233 | ||||||||
Adjusted EBITDA | 10,179 | 57,924 | 51,347 | ||||||||
Less: Cash interest paid, including accruals | (9,738 | ) | (2,833 | ) | (7,688 | ) | |||||
Less: Maintenance and replacement capital expenditures, including accrual for reserve replacement (a) | (3,718 | ) | (5,553 | ) | (4,914 | ) | |||||
Add: Accretion of asset retirement obligations | 125 | 115 | 124 | ||||||||
Add: Unit-based compensation | 1,931 | 1,808 | 1,897 | ||||||||
Distributable cash flow | (1,221 | ) | 51,461 | 40,766 | |||||||
Adjusted for: Distributable cash flow attributable to assets contributed from the sponsor, prior to the period in which the contribution occurred (b) | 2,171 | 1,116 | (725 | ) | |||||||
Distributable cash flow attributable to Hi-Crush Partners LP | 950 | 52,577 | 40,041 | ||||||||
Less: Distributable cash flow attributable to the holder of incentive distribution rights | — | (593 | ) | — | |||||||
Distributable cash flow attributable to limited partner unitholders | $ | 950 | $ | 51,984 | $ | 40,041 | |||||
(a) Maintenance and replacement capital expenditures, including accrual for reserve replacement, were determined based on an estimated reserve replacement cost of $1.35 per ton produced and delivered through September 30, 2017. Effective October 1, 2017, we increased the estimated reserve replacement cost to $1.85 per ton produced and delivered, due to the addition of our first Kermit facility. Effective January 1, 2019, we revised our estimated reserve replacement cost to $2.10 per ton as a result of completion of construction of our second Kermit facility. Such expenditures include those associated with the replacement of equipment and sand reserves, to the extent that such expenditures are made to maintain our long-term operating capacity. The amount presented does not represent an actual reserve account or requirement to spend the capital. | |||||||||||
(b) The Partnership's historical financial information has been recast to consolidate our sponsor and general partner for the periods leading up to their contribution into the Partnership. For purposes of calculating distributable cash flow attributable to Hi-Crush Partners LP, the Partnership excludes the incremental amount of recast distributable cash flow earned during the periods prior to the contribution. |
Unaudited EBITDA, Adjusted EBITDA and Distributable Cash Flow | |||||||
(Amounts in thousands) | |||||||
Year Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Reconciliation of distributable cash flow to net income: | |||||||
Net income | $ | 137,595 | $ | 76,162 | |||
Depreciation and depletion expense | 38,775 | 29,872 | |||||
Amortization expense | 3,374 | 1,681 | |||||
Interest expense | 25,347 | 12,971 | |||||
EBITDA | 205,091 | 120,686 | |||||
Earnings from equity method investments | (5,184 | ) | (75 | ) | |||
Loss on extinguishment of debt | 6,233 | 4,332 | |||||
Adjusted EBITDA | 206,140 | 124,943 | |||||
Less: Cash interest paid, including accruals | (24,183 | ) | (10,950 | ) | |||
Less: Maintenance and replacement capital expenditures, including accrual for reserve replacement (a) | (18,868 | ) | (13,742 | ) | |||
Add: Accretion of asset retirement obligations | 498 | 458 | |||||
Add: Unit-based compensation | 7,439 | 5,714 | |||||
Distributable cash flow | 171,026 | 106,423 | |||||
Adjusted for: Distributable cash flow attributable to assets contributed from the sponsor, prior to the period in which the contribution occurred (b) | 2,796 | 6,573 | |||||
Distributable cash flow attributable to Hi-Crush Partners LP | 173,822 | 112,996 | |||||
Less: Distributable cash flow attributable to the holder of incentive distribution rights | (7,664 | ) | — | ||||
Distributable cash flow attributable to limited partner unitholders | $ | 166,158 | $ | 112,996 | |||
(a) Maintenance and replacement capital expenditures, including accrual for reserve replacement, were determined based on an estimated reserve replacement cost of $1.35 per ton produced and delivered through September 30, 2017. Effective October 1, 2017, we increased the estimated reserve replacement cost to $1.85 per ton produced and delivered, due to the addition of our first Kermit facility. Effective January 1, 2019, we revised our estimated reserve replacement cost to $2.10 per ton as a result of completion of construction of our second Kermit facility. Such expenditures include those associated with the replacement of equipment and sand reserves, to the extent that such expenditures are made to maintain our long-term operating capacity. The amount presented does not represent an actual reserve account or requirement to spend the capital. | |||||||
(b) The Partnership's historical financial information has been recast to consolidate our sponsor and general partner, Hi-Crush Whitehall LLC and Other Assets for the periods leading up to their contribution into the Partnership. For purposes of calculating distributable cash flow attributable to Hi-Crush Partners LP, the Partnership excludes the incremental amount of recast distributable cash flow earned during the periods prior to the contributions. |
Unaudited Consolidated Cash Flow Information | |||||||
(Amounts in thousands) | |||||||
Year Ended | |||||||
December 31, | |||||||
2018 | 2017 (a) | ||||||
Operating activities | $ | 237,303 | $ | 83,975 | |||
Investing activities | (188,137 | ) | (325,120 | ) | |||
Financing activities | 57,367 | 244,026 | |||||
Effects of exchange rate on cash | (1 | ) | — | ||||
Net increase in cash | $ | 106,532 | $ | 2,881 | |||
(a) Financial information has been recast to include the financial position and results attributable to our sponsor and general partner. |
Unaudited Consolidated Balance Sheets | |||||||
(Amounts in thousands, except unit amounts) | |||||||
December 31, | |||||||
2018 | 2017 (a) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 114,256 | $ | 7,724 | |||
Accounts receivable, net | 101,029 | 139,486 | |||||
Inventories | 57,089 | 44,272 | |||||
Prepaid expenses and other current assets | 13,239 | 4,969 | |||||
Total current assets | 285,613 | 196,451 | |||||
Property, plant and equipment, net | 1,031,188 | 900,010 | |||||
Goodwill and intangible assets, net | 71,575 | 8,416 | |||||
Equity method investments | 37,354 | 17,475 | |||||
Other assets | 8,108 | 5,877 | |||||
Total assets | $ | 1,433,838 | $ | 1,128,229 | |||
Liabilities, Equity and Partners’ Capital | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 71,039 | $ | 48,289 | |||
Accrued and other current liabilities | 61,337 | 33,450 | |||||
Current portion of deferred revenues | 19,940 | 4,399 | |||||
Current portion of long-term debt | 2,194 | 4,140 | |||||
Total current liabilities | 154,510 | 90,278 | |||||
Deferred revenues | 9,845 | 7,384 | |||||
Long-term debt | 443,283 | 194,462 | |||||
Asset retirement obligations | 10,677 | 10,179 | |||||
Other liabilities | 8,276 | 156 | |||||
Total liabilities | 626,591 | 302,459 | |||||
Commitments and contingencies | |||||||
Equity and partners' capital: | |||||||
Limited partners interest, 100,874,988 and 89,009,188 units outstanding, respectively | 811,477 | 1,239,282 | |||||
Accumulated other comprehensive loss | (4,230 | ) | — | ||||
Total partners’ capital | 807,247 | 1,239,282 | |||||
Non-controlling interest | — | (413,512 | ) | ||||
Total equity and partners' capital | 807,247 | 825,770 | |||||
Total liabilities, equity and partners' capital | $ | 1,433,838 | $ | 1,128,229 | |||
(a) Financial information has been recast to include the financial position and results attributable to our sponsor and general partner. |
Unaudited Per Ton Operating Activity | |||||||||||
(Amounts in thousands, except tons and per ton amounts) | |||||||||||
Three Months Ended | |||||||||||
December 31, | September 30, | ||||||||||
2018 | 2017 | 2018 | |||||||||
Sand sold | 1,976,805 | 2,985,115 | 2,775,360 | ||||||||
Sand produced and delivered | 2,009,855 | 3,001,744 | 2,655,831 | ||||||||
Contribution margin | $ | 28,358 | $ | 70,028 | $ | 66,389 | |||||
Contribution margin per ton sold | $ | 14.35 | $ | 23.46 | $ | 23.92 |
Year Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Sand sold | 10,407,296 | 8,938,713 | |||||
Sand produced and delivered | 10,198,814 | 9,067,584 | |||||
Contribution margin | $ | 264,866 | $ | 164,275 | |||
Contribution margin per ton sold | $ | 25.45 | $ | 18.38 |
Unaudited Net Income per Limited Partner Unit | |||||||||||
(Amounts in thousands, except units and per unit amounts) | |||||||||||
Three Months Ended | Year Ended | ||||||||||
December 31, | December 31, | ||||||||||
Weighted average limited partner units outstanding: | 2018 | 2017 | 2018 | 2017 | |||||||
Basic common units outstanding | 98,359,616 | 90,201,488 | 91,248,042 | 86,518,249 | |||||||
Potentially dilutive common units | — | 1,382,733 | 2,390,138 | 1,382,733 | |||||||
Diluted common units outstanding | 98,359,616 | 91,584,221 | 93,638,180 | 87,900,982 |
Reconciliation of net income (loss) and the assumed allocation of net income (loss) under the two-class method for purposes of computing earnings (loss) per limited partner unit: | |||||||||||
Three Months Ended December 31, 2018 | |||||||||||
General Partner and IDRs |
Limited Partner Units |
Total | |||||||||
Declared distribution | $ | — | $ | — | $ | — | |||||
Assumed allocation of distribution in excess of loss | — | (9,930 | ) | (9,930 | ) | ||||||
Add back recast losses attributable to our sponsor and general partner through October 21, 2018 | — | 2,218 | 2,218 | ||||||||
Assumed allocation of net loss | $ | — | $ | (7,712 | ) | $ | (7,712 | ) | |||
Loss per limited partner unit - basic | $ | (0.08 | ) | ||||||||
Loss per limited partner unit - diluted | $ | (0.08 | ) |
Three Months Ended December 31, 2017 | |||||||||||
General Partner and IDRs |
Limited Partner Units |
Total | |||||||||
Declared distribution | $ | — | $ | 17,802 | $ | 17,802 | |||||
Assumed allocation of earnings in excess of distribution | — | 24,126 | 24,126 | ||||||||
Add back recast losses attributable to our sponsor and general partner | — | 1,250 | 1,250 | ||||||||
Assumed allocation of net income | $ | — | $ | 43,178 | $ | 43,178 | |||||
Earnings per limited partner unit - basic | $ | 0.48 | |||||||||
Earnings per limited partner unit - diluted | $ | 0.47 |
Year Ended December 31, 2018 | |||||||||||
General Partner and IDRs |
Limited Partner Units |
Total | |||||||||
Declared distribution | $ | 7,664 | $ | 109,836 | $ | 117,500 | |||||
Assumed allocation of earnings in excess of distributions | — | 20,095 | 20,095 | ||||||||
Add back recast losses attributable to our sponsor and general partner through October 21, 2018 | — | 3,195 | 3,195 | ||||||||
Assumed allocation of net income | $ | 7,664 | $ | 133,126 | $ | 140,790 | |||||
Earnings per limited partner unit - basic | $ | 1.46 | |||||||||
Earnings per limited partner unit - diluted | $ | 1.42 |
Year Ended December 31, 2017 | |||||||||||
General Partner and IDRs |
Limited Partner Units |
Total | |||||||||
Declared distribution | $ | — | $ | 31,457 | $ | 31,457 | |||||
Assumed allocation of earnings in excess of distributions | — | 44,705 | 44,705 | ||||||||
Add back recast losses attributable to our sponsor and general partner | — | 6,372 | 6,372 | ||||||||
Add back recast losses attributable to Whitehall and Other Assets through March 15, 2017 | — | 1,471 | 1,471 | ||||||||
Assumed allocation of net income | $ | — | $ | 84,005 | $ | 84,005 | |||||
Earnings per limited partner unit - basic | $ | 0.97 | |||||||||
Earnings per limited partner unit - diluted | $ | 0.96 |