Vertex Energy, Inc. Reports Fourth Quarter And Full-Year 2019 Results

HOUSTON, TX / ACCESSWIRE /  March 4, 2020 / Vertex Energy, Inc. (NASDAQ:VTNR, “Vertex” or the “Company”), a leading specialty refiner and marketer of high-quality hydrocarbon products, today announced financial results for the fourth quarter and full-year 2019.

4Q19 FINANCIAL HIGHLIGHTS

  • Total direct collections +19.1% year-over-year (y/y)
  • Total revenue of $42.6 million (+$0.8 million y/y)
  • Total net income of $1.4 million (+$1.6 million y/y)
  • Total adjusted EBITDA of $3.9 million (+$5.5 million y/y)

FULL-YEAR 2019 HIGHLIGHTS

  • Total direct collections +20.6% y/y
  • Completed Tensile Capital Joint-Venture
  • Completed Bunker One Strategic Partnership

For the three months ended December 31, 2019, the Company reported net income available to common shareholders of $1.4 million, or $0.04 per diluted share, versus a net loss of ($0.2) million, or ($0.01) per basic share, in the fourth quarter of 2018. Vertex reported Adjusted EBITDA of $3.9 million in the fourth quarter of 2019, versus ($1.6) million in the prior-year period. For the full-year 2019, the Company reported a net loss available to common shareholders of ($11.4) million, or ($0.28) per basic share, versus a net loss of ($8.0) million, or ($0.23) per basic share, in 2018. Vertex reported Adjusted EBITDA of $7.4 million for the full-year 2019, versus $7.3 million in the prior-year period. A schedule reconciling the Company’s GAAP and non-GAAP financial results (including Adjusted EBITDA) is included later in this release.

Fourth quarter results benefited from a combination of increased sales volumes and elevated product margins, resulting in improved profitability in the period. In advance of the January 1, 2020 low-sulfur marine fuel mandate set forth by the International Maritime Organization, the spread between high-sulfur fuel oil and corresponding middle distillate values widened materially. In response to improved market conditions, the Company’s Marrero, Louisiana refinery operated near peak capacity during the fourth quarter of 2019, capitalizing on favorable refining economics evident in the market. During the fourth quarter of 2019, Marrero sold near-record volumes of middle distillate to the Company’s long-term distribution partner, Bunker One USA. At the Company’s Ohio-based Heartland refinery, increased sales volumes of high-purity base oils also contributed to the year-over-year improvement in fourth quarter results.

Direct collections of used motor oil (UMO) increased 19.1% in the fourth quarter of 2019, when compared to the prior-year’s period. UMO collections represented approximately 44.5% of overall feedstock processed at the Company’s refineries in the fourth quarter of 2019, versus 36.5% in the fourth quarter of 2018, with the remaining feedstock being sourced from third-party UMO suppliers.

MANAGEMENT COMMENTARY

“Fourth quarter results exceeded our guidance range, given strong performances at both our Marrero and Heartland refineries,” stated Benjamin P. Cowart, President and CEO of Vertex, who continued, “In expectation of improved product spreads leading up to the January 1, 2020 IMO transition, we operated our Marrero refinery at capacity, while building inventories of middle distillates. This strategy served us well in the fourth quarter, positioning us to sell increased volumes at elevated margins. Improved refining economics at Marrero, together with increased sales of high-purity base oils at Heartland, resulted in a return to profitable growth in the period.

“During 2019, we entered into two major strategic partnerships that we believe will position us to achieve material growth in profitability over a multi-year horizon. Our recently announced relationship with Bunker One USA, which provides for a long-term supply-offtake agreement and a net profit-sharing arrangement, represents the single most significant opportunity for growth in 2020. This relationship, together with our previously disclosed joint-venture with Tensile Capital, which positions us to become a leading producer and marketer of high-purity base oils at the Heartland refinery, are both transformational opportunities that we feel position us to create significant value for shareholders, over time.

“During the first quarter 2020, product spreads narrowed from near-record fourth quarter levels, as global trade slowed in reaction to concerns around a novel coronavirus strain. Importantly, we have hedges in place to protect some of our product margins, which we expect will serve to offset part of the recent volatility evident in the market. Even as refining margins are expected to revert back toward long-term averages, contributions from the Bunker One agreement, together with strong demand for high-purity base oils, support our positive outlook for the full-year 2020,” continued Cowart.

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: 844-369-8770

To listen to a replay of the teleconference, which will be available through April 4, 2020:

Domestic Replay: 877-481-4010

Conference ID: 33255

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

Noel Ryan, IRC
720.778.2415
IR@vertexenergy.com

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 Twelve Months  
 
                       
 
  December 31, 2019     December 31, 2018     December 31, 2019     December 31, 2018  
Net income (loss)
                       
attributable to Vertex Energy, Inc.
  $ 1,434,202     $ (201,333 )   $ (5,048,579 )   $ (2,217,767 )
Add (deduct):
                               
Interest Income
    (126 )           (2,697 )     (659 )
Interest Expense
    747,291       833,084       3,070,071       3,281,855  
Depreciation and amortization
    1,846,604       1,756,996       7,180,089       6,991,010  
EBITDA
    4,027,971       2,388,747       5,198,884       8,054,439  
 
                               
Add (deduct):
                               
Loss (gain) on change in value of derivative warrant liability
    819,239       (2,888,687 )     487,524       (763,716 )
Unrealized (gain) loss on derivative instruments
    (1,134,723 )     (1,297,475 )     1,071,792       (695,992 )
Stock-based compensation
    169,350       165,057       642,841       659,836  
Adjusted EBITDA *
  $ 3,881,837     $ (1,632,358)     $ 7,401,039     $ 7,254,567  

* EBITDA and Adjusted EBITDA 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.

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS

 
  December 31, 2019     December 31, 2018  
ASSETS
           
Current assets
           
Cash and cash equivalents
  $ 4,099,655     $ 1,249,831  
Restricted cash
    100,170       1,600,000  
Accounts receivable, net
    12,138,078       9,027,990  
Federal income tax receivable
    68,606       137,212  
Inventory
    6,547,479       8,091,397  
Derivative commodity asset
          695,941  
Prepaid expenses and other current assets
    4,452,920       2,740,541  
Total current assets
    27,406,908       23,542,912  
 
               
 
               
Fixed assets, at cost
    69,469,548       66,762,388  
Less accumulated depreciation
    (24,708,151 )     (19,874,896 )
Fixed assets, net
    44,761,397       46,887,492  
Finance lease right-of-use assets
    851,570       397,515  
Operating lease right-of-use assets
    35,586,885        
Intangible assets, net
    11,243,800       12,578,519  
Deferred income taxes
    68,605       137,211  
Other assets
    840,754       616,759  
TOTAL ASSETS
  $ 120,759,919     $ 84,160,408  
 
               
LIABILITIES, TEMPORARY EQUITY AND EQUITY
               
Current liabilities
               
Accounts payable
  $ 7,620,098     $ 8,791,529  
Accrued expenses
    5,016,132       2,535,347  
Dividends payable
    389,176       403,002  
Finance lease-current
    217,164       95,857  
Operating lease-current
    5,885,304        
Current portion of long-term debt, net of unamortized finance costs
    2,017,345       1,325,240  
Revolving note
    3,276,230       3,844,636  
Derivative commodity liability
    375,850        
Total current liabilities
    24,797,299       16,995,611  
 
               
Long-term debt, net of unamortized finance costs
    12,433,000       14,402,179  
Finance lease-long-term
    610,450       276,355  
Operating lease-long-term
    29,701,581        
Contingent consideration
          15,564  
Derivative warrant liability
    1,969,216       1,481,692  
Total liabilities
    69,511,546       33,171,401  
 
               
COMMITMENTS AND CONTINGENCIES (Note 4)
           
 
               
TEMPORARY EQUITY
               
Series B Preferred Stock, $0.001 par value per share;
10,000,000 shares authorized, 3,826,055 and 3,604,827 shares issued
and outstanding at December 31, 2019 and 2018, respectively with liquidation preference of $11,860,771 and $11,174,964 at December 31, 2019 and 2018, respectively.
    11,006,406       8,900,208  
 
               
Series B1 Preferred Stock, $0.001 par value per share;
17,000,000 shares authorized, 9,028,085 and 10,057,597 shares issued
and outstanding at December 31, 2019 and 2018, respectively with liquidation preference of $14,083,813 and $15,689,851 at December 31, 2019 and 2018, respectively.
    12,743,047       13,279,755  
 
               
Redeemable non-controlling interest
    4,396,894        
Total Temporary Equity
    28,146,347       22,179,963  
EQUITY
               
Series A Convertible Preferred stock, $0.001 par value;
5,000,000 shares authorized and 419,859 and 419,859 shares issued
and outstanding at December 31, 2019 and 2018, respectively, with a liquidation preference of $625,590 and $625,590 at December 31, 2019 and December 31, 2018, respectively.
    420       420  
 
               
Series C Convertible Preferred stock, $0.001 par value per share;
44,000 shares designated; zero and zero
issued and outstanding at December 31, 2019 and 2018, respectively with a liquidation preference of zero and zero at December 31, 2019 and December 31, 2018, respectively.
           
 
               
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 43,395,563 and 40,174,821
issued and outstanding at December 31, 2019 and 2018, respectively.
    43,396       40,175  
Additional paid-in capital
    81,527,351       75,131,122  
Accumulated deficit
    (59,246,514 )     (47,800,886 )
Total Vertex Energy, Inc. stockholders’ equity
    22,324,653       27,370,831  
Non-controlling interest
    777,373       1,438,213  
Total Equity
    23,102,026       28,809,044  
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY
  $ 120,759,919     $ 84,160,408  

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 
  2019     2018  
Revenues
  $ 163,365,565     $ 180,720,661  
Cost of revenues (exclusive of depreciation and amortization shown separately below)
    134,777,113       151,314,039  
Gross profit
    28,588,452       29,406,622  
 
               
Operating expenses:
               
Selling, general and administrative expenses
    24,182,407       21,927,264  
Depreciation and amortization
    7,180,089       6,991,010  
Total operating expenses
    31,362,496       28,918,274  
Income (loss) from operations
    (2,774,044 )     488,348  
Other income (expense):
               
Other income
    920,197       659  
Gain (loss) on sale of assets
    (74,111 )     45,553  
Gain (loss) on change in value of derivative warrant liability
    (487,524 )     763,716  
Interest expense
    (3,070,071 )     (3,281,855 )
Total other expense
    (2,711,509 )     (2,471,927 )
Loss before income taxes
    (5,485,553 )     (1,983,579 )
Income tax benefit
           
Net loss
    (5,485,553 )     (1,983,579 )
Net income (loss) attributable to non-controlling interest and redeemable non-controlling interest
    (436,974 )     234,188  
Net loss attributable to Vertex Energy, Inc.
    (5,048,579 )     (2,217,767 )
 
               
Accretion of redeemable noncontrolling interest to redemption value
    (2,279,371 )      
Accretion of discount on series B and B-1 Preferred Stock
    (2,489,722 )     (3,132,414 )
Dividends on series B and B-1 Preferred Stock
    (1,627,956 )     (2,687,123 )
Net loss available to common stockholders
  $ (11,445,628 )   $ (8,037,304 )
 
               
Loss per common share
               
Basic
  $ (0.28 )   $ (0.23 )
Diluted
  $ (0.28 )   $ (0.23 )
Shares used in computing loss per share
               
Basic
    40,988,946       35,411,264  
Diluted
    40,988,946       35,411,264  

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDING DECEMBER 31, 2019 AND 2018

 
  Common Stock     Series A Preferred     Series C Preferred                          
 
  Shares     $.001 Par     Shares     $.001 Par     Shares     $.001 Par     Additional Paid-in Capital     Retained Earnings     Non-controlling Interest     Total Equity  
Balance on December 31, 2017
    32,658,176     32,658       453,567     454       31,568     32     67,768,509     (39,816,300 )   399,005     28,384,358  
Correction of non-controlling interest
                                              52,718       (52,718 )      
Dividends and Series B and B1 Preferred Stock
    166,630       167                               313,097       (2,687,123 )           (2,373,859 )
Accretion of discount on Series B and B1 Preferred Stock
                                              (1,960,013 )           (1,960,013 )
Conversion of Series B Preferred stock to common
    32,149       33                               99,629       (36,700 )           62,962  
Share based compensation expense, total
                                        659,836                   659,836  
Exercise of options to common
    241                                                        
Conversion of Series A Preferred stock to common
    33,708       34       (33,708 )     (34 )                                    
Conversion of Series C Preferred Stock to common
    3,156,800       3,157                   (31,568 )     (32 )     (3,125 )                  
Conversion of Series B1 Preferred stock to common
    3,977,117       3,976                               6,200,326       (1,135,701 )           5,068,601  
Fixed assets contributed by noncontrolling interest
                                                    857,738       857,738  
Issue of common stock from Nickco contingent consideration
    150,000       150                               92,850                   93,000  
Net income (loss)
                                              (2,217,767 )     234,188       (1,983,579 )
Balance on December 31, 2018
    40,174,821       40,175       419,859       420                   75,131,122       (47,800,886 )     1,438,213       28,809,044  
Dividends on Series B and B1 Preferred Stock
                                              (1,627,956 )           (1,627,956 )
Accretion of discount on Series B and B1 Preferred Stock
                                              (2,169,597 )           (2,169,597 )
Conversion of B1 Preferred Stock to common
    1,642,317       1,642                               2,560,373       (320,125 )           2,241,890  
Share based compensation expense, total
                                        642,840                   642,840  
Exercise of options to common
    78,425       79                               6,996                   7,075  
Distribution to noncontrolling
                                                    (285,534 )     (285,534 )
Adjustment of redeemable noncontrolling interest to redemption value
                                              (2,217,703 )           (2,217,703 )
Adjustment of carrying amount of noncontrolling interest
                                        970,809                   970,809  
Issue of common stock and warrants
    1,500,000       1,500                               2,215,211                   2,216,711  
Net loss
                                              (5,110,247 )     (375,306 )     (5,485,553 )
Balance on December 31, 2019
    43,395,563     43,396       419,859     420               81,527,351     (59,246,514 )   777,373     23,102,026  

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDING DECEMBER 31, 2019 AND 2018

     
      2019     2018  
    Cash flows from operating activities
               
    Net loss
      $ (5,485,553 )   $ (1,983,579 )
    Adjustments to reconcile net loss to cash provided by (used in) operating activities:
                   
    Stock-based compensation expense
        642,840       659,836  
    Depreciation and amortization
        7,180,089       6,991,010  
    Reduction in allowance for bad debt
        (320,013 )     (299,110 )
    Gain on commodity derivative contracts
        2,458,359       (1,062,682 )
    Net cash settlement on commodity derivatives
        (2,841,052 )     369,188  
    Gain on sale of assets
        74,111       (45,553 )
    Gain on disposition
              (241,416 )
    Amortization of debt discount and deferred costs
        573,908       584,336  
    Deferred federal income tax
               
    Decrease in fair value of derivative liability
        487,524       (763,716 )
    Reduction in contingent consideration
        (15,564 )     (128,116 )
    Impairment of goodwill
              176,349  
    Changes in operating assets and liabilities:
                   
    Accounts receivable
        (2,652,864 )     2,143,834  
    Inventory
        1,543,918       (1,786,555 )
    Prepaid expenses
        (257,894 )     (597,146 )
    Accounts payable
        (1,171,433 )     1,493,324  
    Accrued expenses
        2,480,786       42,625  
    Other assets
        (223,995 )     (176,342 )
    Net cash provided by operating activities
        2,473,167       5,376,287  
    Cash flows from investing activities
                   
    Internally developed software
        (489,093 )      
    Proceeds from the sale of assets
        232,020        
    Acquisitions
              (269,826 )
    Purchase of fixed assets
        (3,369,367 )     (2,499,117 )
    Net cash used in investing activities
        (3,626,440 )     (2,768,943 )
    Cash flows from financing activities
                   
    Line of credit proceeds (payments), net
        (568,406 )     (746,891 )
    Proceeds received from issuance of common stock and warrants
        2,216,711        
    Proceeds from exercise of stock options
        7,075        
    Distribution VRM LA
        (285,534 )      
    Contribution received from redeemable noncontrolling interest
        3,150,000        
    Payments on finance leases
        (165,598 )     (77,886 )
    Proceeds from notes payable
        2,809,139       4,024,964  
    Payments made on notes payable
        (4,660,120 )     (4,063,487 )
    Net cash provided by (used in) financing activities
        2,503,267       (863,300 )
    Net change in cash and cash equivalents and restricted cash
        1,349,994       1,744,044  
    Cash and cash equivalents and restricted cash at beginning of the year
        2,849,831       1,105,787  
    Cash and cash equivalents and restricted cash at end of year
      $ 4,199,825     $ 2,849,831  
     
                   
    SUPPLEMENTAL INFORMATION
                   
    Cash paid for interest
      $ 2,505,852     $ 2,722,542  
    Cash paid for income taxes
      $     $  
     
                   
    NON-CASH INVESTING AND FINANCING TRANSACTIONS
                   
    Conversion of Series A Preferred Stock into common stock
      $     $ 34  
    Conversion of Series B and B1 Preferred Stock into common stock
      $ 2,560,373     $ 6,613,052  
    Dividends on Series B and B-1 Preferred Stock
      $ 1,627,956     $ 2,687,123  
    Initial adjustment of carrying amount of redeemable noncontrolling interest
      $ 970,809     $  
    Accretion of discount on Series B and B-1 Preferred Stock
      $ 2,489,722     $ 3,132,414  
    Accretion of redeemable noncontrolling interest to redemption value
      $ 2,279,371     $  
    Equipment acquired under capital leases
      $ 621,000     $ 450,098  
    Contributed assets Vertex Recovery Management LA from non-controlling interest
      $     $ 857,738  
    Common restricted shares for Nickco acquisition
      $     $ 93,000  

    SOURCE: Vertex Energy, Inc. 

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