Vertex Energy, Inc. Announces 2018 First Quarter Financial Results

Revenue Rose 19% Year-Over-Year; Gross Profit rose 67%

Gross Profit Margin was 16.4%

Conference call to be held today at 9:00 A.M. EDT

HOUSTON, May 15, 2018 (GLOBE NEWSWIRE) — Vertex Energy, Inc. (NASDAQ:VTNR), a specialty refiner of alternative feedstocks and marketer of high-purity petroleum products, announced today its financial results for the first quarter ended March 31, 2018.

FINANCIAL HIGHLIGHTS FOR FIRST QUARTER OF 2018

  • Consolidated revenue increased 19% to $41.4 million, compared to $34.8 million for the first quarter of 2017.
  • Gross profit was up 67% to $6.8 million compared to 11.7% for the first quarter of 2017.
  • Gross profit margin was 16.4%.
  • Total overall volume rose 1%, compared to the prior year’s period.
  • Consolidated per barrel margin increased 65% for the first quarter of 2018 over the same period a year ago.
  • Collected volume grew 17% for the first quarter of 2018 over the first quarter of 2017.
  • Net loss attributable to common shareholders was $3.5 million, or a loss of $0.10 per share.

Benjamin P. Cowart, Chairman and CEO of Vertex Energy, Inc., stated, “Overall, we are pleased with the state of our business operations. We managed to hit or surpass many of our internal targets. However, we are not happy with our EBITDA and net income results, which were negatively affected by a heater problem at our Heartland facility and an extended turnaround down time at our Marrero facility. Both of our facilities are now fully operational.”

Mr. Cowart added, “Despite the negative impact on our production, there was strong demand for our finished products. We witnessed an improvement in our revenues, gross profit, and gross profit margins. In addition, we managed to protect our spreads by maintaining our charge-for-oil for collected volume. We have recaptured our production capacity and plan to continue to make adjustments at our facilities as necessary in an effort to yield a significant improvement in production volume and our financial performance for 2018.”

FIRST QUARTER 2018 FINANCIAL RESULTS CONFERENCE CALL DETAILS

Management will host a conference call today at 9 A.M. EDT. Those who wish to participate in the conference call may telephone 1-877-869-3847 from the U.S. and International callers may telephone 1-201-689-8261, approximately 15 minutes before the call. A webcast will also be available under the Investor Relations section at www.vertexenergy.com.

A digital replay will be available by telephone approximately two hours after the completion of the call until July 31, 2018, and may be accessed by dialing 1-877-660-6853 from the U.S. or 1-201-612-7415 for international callers using conference ID #13679493.

ABOUT VERTEX ENERGY, INC.

Vertex Energy, Inc. (NASDAQ:VTNR) is a specialty refiner of alternative feedstocks and marketer of high-purity petroleum products. With its headquarters in Houston, Texas, Vertex is one of the largest processors of used motor oil in the U.S. and has processing capacity of over 115 million gallons annually with operations located in Houston and Port Arthur (TX), Marrero (LA), and Columbus (OH). Vertex also has a facility, Myrtle Grove, located on a 41 acre industrial complex along the Gulf Coast in Belle Chasse, LA, with existing hydroprocessing and plant infrastructure assets that includes nine million gallons of storage. Vertex has implemented a cost-effective strategy for building its feedstock supply by establishing a successful self-collection and aggregation system. The Company has built a reputation as a key supplier of Group II+ and Group III base oils to the lubricant manufacturing industry in North America. For more information on Vertex Energy please contact Porter, LeVay & Rose, Inc.’s investor relations representative, Marlon Nurse, D.M. at 212-564-4700 or visit our website at www.vertexenergy.com.

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 also takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex Energy.

       
Vertex Energy, Inc.
Reconciliation of Net Income (Loss) attributable to Vertex Energy, Inc., to Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) and Adjusted EBITDA*
       
       For the Three Months
Ended March 31, 2018
Net (loss) income      
attributable to Vertex Energy, Inc.   $   (2,258,622 )
Add (deduct):      
Interest income     $   –   
Interest expense     $   802,515  
Depreciation and amortization     $   1,694,099  
Tax expense (benefit)     $   –   
       
EBITDA*     $   237,992  
       
Add (deduct): Stock-Based compensation     $   145,971  
       
Adjusted EBITDA     $   383,963  
           

* 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 unrealized losses (gains) on derivative contracts and stock-based compensation expense. 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
(UNAUDITED)
       
  March 31,
 2018
  December 31,
 2017
ASSETS      
Current assets      
Cash and cash equivalents $ 52,876     $ 1,105,787  
Accounts receivable, net 11,237,297     11,288,991  
Federal income tax receivable 274,423      
Inventory 8,112,625     6,304,842  
Prepaid expenses 2,635,727     1,771,832  
Total current assets 22,312,948     20,471,452  
       
Noncurrent assets      
Fixed assets, at cost 65,541,421     65,237,652  
  Less accumulated depreciation (17,673,342 )   (16,617,824 )
  Fixed assets, net 47,868,079     48,619,828  
Goodwill and other intangible assets, net 14,047,119     14,499,354  
Deferred tax asset     274,423  
Other assets 492,417     440,417  
TOTAL ASSETS $ 84,720,563     $ 84,305,474  
       
LIABILITIES, TEMPORARY EQUITY, AND EQUITY      
Current liabilities      
Accounts payable and accrued expenses $ 11,465,453     $ 10,318,738  
Dividends payable 554,917     420,713  
Capital leases-current 9,698      
Current portion of long-term debt, net of unamortized finance costs 1,158,196     1,616,926  
Derivative liability 466,828      
Revolving note 4,239,388     4,591,527  
 Total current liabilities 17,894,480     16,947,904  
Long-term liabilities      
  Long-term debt, net of unamortized finance costs 14,744,333     13,531,179  
Capital leases-long-term 19,923      
Contingent consideration 236,680     236,680  
Derivative liability 2,677,159     2,245,408  
Total liabilities 35,572,575     32,961,171  
       
COMMITMENTS AND CONTINGENCIES (Note 3)      
       
TEMPORARY EQUITY      
Series B Convertible Preferred Stock, $0.001 par value per share;
10,000,000 shares designated, 3,479,016 and 3,427,597 shares issued and outstanding at March 31, 2018 and December 31, 2017,
respectively with a liquidation preference of $10,784,950 and $10,625,551 at March 31, 2018 and December 31, 2017, respectively.
7,583,722     7,190,467  
       
Series B1 Convertible Preferred Stock, $0.001 par value per share;
17,000,000 shares designated, 12,947,916 and 13,151,989 shares issued and outstanding at March 31, 2018 and December 31, 2017,
respectively, with a liquidation preference of $20,198,749 and $20,517,103 at March 31, 2018 and December 31, 2017, respectively.
15,659,226     15,769,478  
Total Temporary Equity 23,242,948     22,959,945  
EQUITY      
50,000,000 Preferred shares authorized:      
Series A Convertible Preferred Stock, $0.001 par value;
5,000,000 shares designated, 453,567 and 453,567 shares issued and outstanding at March 31, 2018 and December 31, 2017,
respectively, with a liquidation preference of $675,815 and $675,815 at March 31, 2018 and December 31, 2017, respectively.
454     454  
       
Series C Convertible Preferred Stock, $0.001 par value;
44,000 shares designated, 31,568 and 31,568 shares issued and outstanding at March 31, 2018 and December 31, 2017,
respectively, with a liquidation preference of $3,156,800 and $3,156,800 at March 31, 2018 and December 31, 2017, respectively.
32     32  
       
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 33,158,176 and 32,658,176 shares issued and outstanding at March 31, 2018 and
December 31, 2017, respectively.
33,158     32,658  
Additional paid-in capital 68,693,980     67,768,509  
Accumulated deficit (43,272,128 )   (39,816,300 )
Total Vertex Energy, Inc. stockholders’ equity 25,455,496     27,985,353  
Non-controlling interest 449,544     399,005  
Total Equity $ 25,905,040     $ 28,384,358  
TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY $ 84,720,563     $ 84,305,474  
               

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
       
      Three Months Ended March 31,
      2018   2017
Revenues     $ 41,368,195     $ 34,770,614  
Cost of revenues (exclusive of depreciation and amortization shown separately below)     34,588,749     30,701,554  
Gross profit     6,779,446     4,069,060  
           
Operating expenses:          
Selling, general and administrative expenses     5,645,442     5,229,837  
Depreciation and amortization     1,694,099     1,600,060  
Total operating expenses     7,339,541     6,829,897  
Loss from operations     (560,095 )   (2,760,837 )
Other income (expense):          
Interest income         1,952  
Gain (loss) on sale of assets     42,680     (13,100 )
Gain (loss) on change in value of derivative liability     (431,751 )   920,672  
Gain (loss) on futures contracts     (456,402 )    
Interest expense     (802,515 )   (1,336,487 )
Total other income (expense)     (1,647,988 )   (426,963 )
Loss before income tax     (2,208,083 )   (3,187,800 )
Income tax benefit (expense)          
Net loss     (2,208,083 )   (3,187,800 )
Net income attributable to non-controlling interest     50,539     8,607  
Net loss attributable to Vertex Energy, Inc.     (2,258,622 )   (3,196,407 )
           
Accretion of discount on Series B and B-1 Preferred Stock     (457,853 )   (433,201 )
Accrual of dividends on Series B and B-1 Preferred Stock     (739,354 )   (417,636 )
Net loss available to common shareholders     $ (3,455,829 )   $ (4,047,244 )
Loss per common share          
Basic and diluted     $ (0.10 )   $ (0.12 )
Shares used in computing earnings per share          
Basic and diluted     33,063,732     32,953,812  
               

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2018 AND 2017 (UNAUDITED)
   
  Three Months Ended
  March 31,
 2018
  March 31,
 2017
Cash flows from operating activities      
Net loss $ (2,208,083 )   $ (3,187,800 )
 Adjustments to reconcile net loss to cash provided by (used in) operating activities      
Stock based compensation expense 145,971     148,736  
Depreciation and amortization 1,694,099     1,600,060  
(Gain) loss on sale of assets (42,680 )   13,100  
(Increase) decrease in fair value of derivative liability 431,751     (920,672 )
  (Increase) decrease in future contracts 456,402      
  Net cash settlements on commodity derivatives (763,997 )    
  Amortization of debt discount and deferred costs 143,477     318,512  
Changes in operating assets and liabilities      
Accounts receivable 51,694     3,934,346  
Inventory (1,807,783 )   (381,981 )
Prepaid expenses (89,472 )   1,273,772  
Accounts payable and accrued expenses 1,146,716     (1,322,370 )
Other assets (52,000 )   (253,000 )
Net cash provided by (used in) operating activities (893,905 )   1,222,703  
Cash flows from investing activities      
Acquisition of Acadiana     (320,700 )
Purchase of fixed assets (490,361 )   (1,100,962 )
Proceeds from sale of  fixed assets 75,230     62,594  
Net cash provided by (used in) investing activities (415,131 )   (1,359,068 )
Cash flows from financing activities      
Payment of debt issuance costs     (1,656,350 )
Line of credit (payments) proceeds, net (352,139 )   (1,818,744 )
Proceeds from note payable 1,667,426     12,160,194  
Payments on note payable (1,059,162 )   (10,241,622 )
Net cash provided by (used in) financing activities 256,125     (1,556,522 )
Net change in cash, cash equivalents and restricted cash (1,052,911 )   (1,692,887 )
Cash, cash equivalents, and restricted cash at beginning of the period 1,105,787     3,206,158  
Cash, cash equivalents, and restricted cash at end of period $ 52,876     $ 1,513,271  
       

SUPPLEMENTAL INFORMATION      
Cash paid for interest $ 477,583     $ 260,352  
Cash received for income tax benefit $     $  
NON-CASH INVESTING AND FINANCING TRANSACTIONS      
Conversion of Series A Preferred Stock into common stock     30  
Conversion of Series B-1 Preferred Stock into common stock $ 779,500     $ 119,440  
Accretion of discount on Series B and B-1 Preferred Stock $ 457,853     $ 433,201  
Dividends-in-kind  accrued on Series B and B-1 Preferred Stock $ 739,354     $ 417,636  
Return of common shares for sale escrow $     $ 1,109  
               

Investor Relations Contact:
Marlon Nurse, D.M.
Senior Vice President
212-564-4700