Today, Cypress Environmental Partners, L.P., (NYSE: CELP)
(“Cypress”) reported its financial results for the three months
ended March 31, 2021.
HIGHLIGHTS
- Cypress reduced debt by $20.2 million during the first quarter
of 2021.
- Net loss attributable to common unitholders of $3.7 million for
the three months ended March 31, 2021.
- Adjusted EBITDA of ($0.8 million) for the three months ended
March 31, 2021.
- Distributable cash flow (DCF) of ($3.1 million) for the three
months ended March 31, 2021.
- Our common unit and preferred unit distributions remain
suspended as we focus on reducing debt.
- Received first award for inspection services on non-energy
municipal infrastructure.
FIRST QUARTER 2021 SUMMARY FINANCIAL
RESULTS
Three Months Ended
March 31,
2021
2020
(Unaudited)
(in thousands, except
per unit amounts)
Net loss
$
(3,147)
$
(877)
Net loss attributable to common
unitholders
$
(3,686)
$
(1,822)
Net loss per limited partner unit – basic
and diluted
$
(0.30)
$
(0.15)
Adjusted EBITDA (1)
$
(820)
$
2,668
Distributable cash flow (1)
$
(3,119)
$
368
(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 operating results for the quarter were both disappointing
and unacceptable. During the quarter we took additional measures to
reduce our costs with an additional reduction in workforce and
furloughs. The COVID-19 global pandemic has had a profound impact
on our customers, and in turn us. As commodity prices have
continued to improve with WTI crude oil approaching $65 per barrel,
we are seeing our customers resume spending on inspection services
that were deferred and we have seen some nominal growth in the
number of inspectors deployed. The first and fourth quarters are
typically our slower quarters each year. I continue to be proud of
how our employees have handled the challenges in the field and the
work from home environment. We have re-opened our regional field
offices, and we are re-opening our headquarters this month,” said
Peter C. Boylan III, Chairman, President, and CEO. “Our sales
efforts are beginning to show some promising results with some
exciting wins with new municipal (City or County) customers
inspecting non-energy public assets. We made $20.2 million of
payments during the quarter to reduce the balance on our revolving
credit facility to $41.8 million at March 31, 2021. We are
significantly restricted on our ability to make cash distributions
on our common and preferred units during this renewal term. An
affiliate of our general partner has graciously agreed to suspend
his right to receive distributions on his preferred equity until we
reduce our leverage.”
“We continue our diversification efforts to offer our inspection
services to other industries, including municipal infrastructure,
water, sewer, electrical transmission, bridge infrastructure, and
renewables (such as wind, solar, and hydroelectric). We have begun
bidding on inspection opportunities in these new markets and have
won a nice multi-year new contract, and have several other bids
pending. Strategically, over time we hope to have the majority of
our inspection revenue coming from these new segments. We still
serve less than 10% of the energy market and continue to focus on
winning new customers. We also continue to make meaningful progress
winning new business with public utilities that provide natural gas
to consumers and businesses.”
SEGMENT UPDATE
Inspection Services
- During the first quarter Cypress had an average headcount of
447 inspectors working throughout the United States. Although
several large projects that had been previously awarded were
cancelled in 2020 with the economic downturn, Cypress continues to
bid and win new work. Headcount in early 2021 has remained low, as
customers continue to evaluate their spending plans. The monthly
average inspector headcount reached a low of 436 in January 2021
and increased to 459 in March 2021. Cypress expects to see
headcount increase in the coming months.
- Cypress continues to aggressively pursue organic business
development (despite the work-from-home environment that has
precluded in person meetings with customers) and has successfully
been awarded some new customer contracts and has renewed existing
contracts.
- Legal expenses in the quarter were $0.6 million defending
various Fair Labor Standards Act litigation matters.
Pipeline & Process Services (“PPS”)
- Activity slowed toward the end of 2020 and continues to be
slow, as many projects that began prior to the pandemic were
completed earlier in 2020. The PPS segment implemented substantial
salary reductions, furloughs, and reductions-in-force in the first
quarter 2021. Revenues reached a low of less than $0.1 million in
January and February 2021 and increased to $0.3 million in March
2021.
- Bid activity has recently increased after a very slow start in
2021. However, the backlog remains weak.
Water & Environmental Services (“Environmental
Services”)
- Cypress’s water treatment facilities generally receive more
water when its customers’ oil production increases from the
completion of new oil wells in North Dakota. Fifteen drilling rigs
are currently operating in North Dakota, an increase of
approximately 36% compared to only eleven at the end of 2020. This
compares to 53 rigs in February 2020, prior to the COVID-19
pandemic. The volume of water processed reached a low of 0.4
million barrels in February 2021 and increased to 0.5 million
barrels in March 2021.
- The pending Dakota Access Pipeline decision in a Federal
lawsuit remains a major overhang in North Dakota.
- Several North Dakota customers have recently divested their
assets to new buyers that may have a stronger interest in expanding
their production.
COMMON UNIT & PREFERRED UNIT DISTRIBUTIONS
In July 2020, Cypress announced that it had temporarily
suspended common unit distributions. Cypress’s credit facility, as
amended in March 2021, contains significant restrictions on the
payment of distributions. As a result, Cypress does not expect to
pay significant distributions in the near term; instead, Cypress
expects to continue to use available cash to pay down debt and for
working capital needs. An affiliate of the General Partner of
Cypress also agreed to suspend the distribution payment to which he
is entitled on his preferred units.
FIRST QUARTER 2021 OPERATING RESULTS BY BUSINESS
SEGMENT
Inspection Services
The Inspection Services segment’s results for the three months
ended March 31, 2021 and 2020 were:
- Revenue - $25.5 million and $63.9 million, respectively, a
decrease of 60%.
- Gross Margin - $2.6 million and $6.4 million, respectively, a
decrease of 59%.
Pipeline & Process Services
(“PPS”)
The PPS segment’s results for the three months ended March 31,
2021 and 2020 were:
- Revenue - $0.3 million and $2.9 million, respectively, a
decrease of 89%.
- Gross Margin – ($0.5 million) and $0.6 million, respectively, a
decrease of 189%.
Water & Environmental Services
(“Environmental Services”)
The Environmental Services segment’s results for the three
months ended March 31, 2021 and 2020 were:
- Revenue - $1.2 million and $1.7 million, respectively, a
decrease of 30%.
- Gross Margin - $0.8 million and $1.0 million, respectively, a
decrease of 25%.
CAPITALIZATION, LIQUIDITY, AND FINANCING
Cypress had outstanding borrowings of $41.8 million on its
credit facility and cash and cash equivalents of $5.3 million at
March 31, 2021. In March 2021, Cypress reached agreement with the
lenders to modify and extend the maturity of the credit agreement
to May 31, 2022. The total capacity on the amended credit facility
is $75.0 million. The amendment increased the allowable gross
leverage ratio to 6.0x at March 31, 2021, 5.3x at June 30, 2021,
and 4.5x at September 30, 2021. The maximum leverage ratio returns
to 4.0x at December 31, 2021. Cypress had a gross leverage ratio of
5.2x at March 31, 2021.
CAPITAL EXPENDITURES
During the quarter, Cypress had $0.1 million in maintenance
capital expenditures and no expansion capital expenditures, which
are reflective of an attractive business model that requires
minimal capital expenditures.
QUARTERLY REPORT
Cypress filed its quarterly report on Form 10-Q for the three
months ended March 31, 2021 with the Securities and Exchange
Commission today. Cypress will also post a copy of the Form 10-Q on
its website at www.cypressenvironmental.biz.
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. Cypress'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 Cypress may not be comparable to similarly-titled
measures of other entities because other entities may not calculate
their measures in the same manner.
Cypress 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. Cypress defines adjusted EBITDA attributable to
limited partners as adjusted EBITDA exclusive of amounts
attributable to the general partner and to noncontrolling
interests. Cypress 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 paid or accrued 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 Cypress's management and by
external users of its financial statements, such as investors,
banks, and others to assess:
- financial performance of Cypress without regard to financing
methods, capital structure or historical cost basis of assets;
- Cypress's operating performance and return on capital as
compared to those of other companies, without regard to financing
methods or capital structure; and
- the ability of Cypress'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 utility industries, including pipeline &
infrastructure inspection, nondestructive examination testing,
various integrity services, and pipeline & process services
throughout the United States. Cypress also provides environmental
services to upstream and midstream 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
Cypress's control. If any of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect,
Cypress'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 Cypress's
results of operations and financial condition are described in
detail in the "Risk Factors" section of Cypress'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
Cypress'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. Cypress 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 March 31, 2021 and
December 31, 2020
(in thousands)
March 31
December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
5,291
$
17,893
Trade accounts receivable, net
13,565
18,420
Prepaid expenses and other
1,926
2,033
Total current assets
20,782
38,346
Property and equipment:
Property and equipment, at cost
26,858
26,929
Less: Accumulated depreciation
17,050
16,470
Total property and equipment, net
9,808
10,459
Intangible assets, net
16,719
17,386
Goodwill
50,407
50,389
Finance lease right-of-use assets, net
538
607
Operating lease right-of-use assets
1,831
1,987
Debt issuance costs, net
1,079
242
Other assets
572
570
Total assets
$
101,736
$
119,986
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable
$
1,819
$
2,070
Accounts payable - affiliates
5,697
58
Accrued payroll and other
6,949
4,876
Income taxes payable
345
328
Finance lease obligations
250
250
Operating lease obligations
357
439
Total current liabilities
15,417
8,021
Long-term debt
41,829
62,029
Finance lease obligations
238
300
Operating lease obligations
1,413
1,549
Other noncurrent liabilities
339
182
Total liabilities
59,236
72,081
Owners' equity:
Partners’ capital:
Common units (12,331 and 12,213 units
outstanding at
March 31, 2021 and December 31, 2020,
respectively)
23,581
27,507
Preferred units (5,769 units outstanding
at March 31, 2021 and
December 31, 2020)
45,324
44,291
General partner
(25,876
)
(25,876
)
Accumulated other comprehensive loss
(2,708
)
(2,655
)
Total partners' capital
40,321
43,267
Noncontrolling interests
2,179
4,638
Total owners' equity
42,500
47,905
Total liabilities and owners' equity
$
101,736
$
119,986
CYPRESS ENVIRONMENTAL
PARTNERS, L.P.
Unaudited Condensed
Consolidated Statements of Operations
For the Three Months Ended
March 31, 2021 and 2020
(in thousands, except per unit
data)
Three Months Ended March
31,
2021
2020
Revenue
$
26,946
$
68,483
Costs of services
24,050
60,528
Gross margin
2,896
7,955
Operating costs and expense:
General and administrative
4,326
5,940
Depreciation, amortization and
accretion
1,239
1,208
Gain on asset disposals, net
(37
)
(12
)
Operating (loss) income
(2,632
)
819
Other (expense) income:
Interest expense, net
(802
)
(1,124
)
Foreign currency (losses) gains
69
(457
)
Other, net
116
105
Net loss before income tax (benefit)
expense
(3,249
)
(657
)
Income tax (benefit) expense
(102
)
220
Net loss
(3,147
)
(877
)
Net loss attributable to noncontrolling
interests
(494
)
(88
)
Net loss attributable to limited
partners
(2,653
)
(789
)
Net income attributable to preferred
unitholder
1,033
1,033
Net loss attributable to common
unitholders
$
(3,686
)
$
(1,822
)
Net loss per common limited partner
unit:
Basic and diluted
$
(0.30
)
$
(0.15
)
Weighted average common units
outstanding:
Basic and diluted
12,243
12,096
Reconciliation of Net Loss to Adjusted
EBITDA and
Distributable Cash Flow
Three Months ended March
31,
2021
2020
(in thousands)
Net loss
$
(3,147
)
$
(877
)
Add:
Interest expense
802
1,124
Depreciation, amortization and
accretion
1,443
1,480
Income tax (benefit) expense
(102
)
220
Equity based compensation
253
264
Foreign currency losses
-
457
Less:
Foreign currency gains
69
-
Adjusted EBITDA
$
(820
)
$
2,668
Adjusted EBITDA attributable to
noncontrolling interests
(375
)
62
Adjusted EBITDA attributable to limited
partners
$
(445
)
$
2,606
Less:
Preferred unit distributions paid or
accrued
1,033
1,033
Cash interest paid, cash taxes paid, and
maintenance capital expenditures
1,641
1,205
Distributable cash flow
$
(3,119
)
$
368
Reconciliation of Net Loss Attributable
to Limited Partners to Adjusted
EBITDA Attributable to Limited Partners
and Distributable Cash Flow
Three Months ended March
31,
2021
2020
(in thousands)
Net loss attributable to limited
partners
$
(2,653
)
$
(789
)
Add:
Interest expense attributable to limited
partners
799
1,124
Depreciation, amortization and accretion
attributable to limited partners
1,327
1,335
Income tax expense attributable to limited
partners
(102
)
215
Equity based compensation attributable to
limited partners
253
264
Foreign currency losses attributable to
limited partners
-
457
Less:
Foreign currency gains attributable to
limited partners
69
-
Adjusted EBITDA attributable to limited
partners
(445
)
2,606
Less:
Preferred unit distributions paid or
accrued
1,033
1,033
Cash interest paid, cash taxes paid, and
maintenance capital expenditures
attributable to limited partners
1,641
1,205
Distributable cash flow
$
(3,119
)
$
368
Reconciliation of Net Cash Flows
Provided By Operating
Activities to Adjusted EBITDA and
Distributable Cash Flow
Three Months ended March
31,
2021
2020
(in thousands)
Cash flows provided by operating
activities
$
10,883
$
4,405
Changes in trade accounts receivable,
net
(4,855
)
(7,698
)
Changes in prepaid expenses and other
(142
)
577
Changes in accounts payable and accounts
payable - affiliates
(5,277
)
1,197
Changes in accrued liabilities and
other
(1,967
)
3,154
Change in income taxes payable
(17
)
(221
)
Interest expense (excluding non-cash
interest)
622
980
Income tax expense (excluding deferred
taxes)
(102
)
220
Other
35
54
Adjusted EBITDA
$
(820
)
$
2,668
Adjusted EBITDA attributable to
noncontrolling interests
(375
)
62
Adjusted EBITDA attributable to limited
partners
$
(445
)
$
2,606
Less:
Preferred unit distributions paid or
accrued
1,033
1,033
Cash interest paid, cash taxes paid, and
maintenance capital expenditures
1,641
1,205
Distributable cash flow
$
(3,119
)
$
368
Operating Data
Three Months
Ended March 31,
2021
2020
Avg. number of inspectors
447
1,016
Avg. revenue per inspector per week
$
4,429
$
4,838
Inspection Services gross margins
10.3
%
10.0
%
Avg. number of field personnel
23
27
Avg. revenue per field personnel per
week
$
1,089
$
8,325
Pipeline & Process Services gross
margins
(154.7
)%
19.2
%
Total barrels of saltwater processed
(000's)
1,393
2,321
Avg. revenue per barrel
$
0.84
$
0.72
Environmental Services gross margins
65.9
%
61.3
%
Capital expenditures (000's)
$
104
$
1,140
Common unit distributions (000's)
$
-
$
2,562
Preferred unit distributions paid
(000's)
$
-
$
1,033
Preferred unit distributions accrued
(000's)
$
1,033
$
-
Net debt leverage ratio
4.59x
2.04x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210514005557/en/
Investors or Analysts: Cypress Environmental Partners, L.P. -
Jeff Herbers – Vice President & Chief Financial Officer
jeff.herbers@cypressenvironmental.biz or 918-947-5730
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