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Name | Symbol | Market | Type |
---|---|---|---|
Cypress Environmental Partners LP | NYSE:CELP | NYSE | Trust |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.4883 | 0 | 01:00:00 |
Today, Cypress Environmental Partners, L.P. (NYSE: CELP) (“Cypress”) reported its financial results for the three months ended September 30, 2021.
HIGHLIGHTS
THIRD QUARTER 2021 SUMMARY FINANCIAL RESULTS
(in thousands, except for per unit data)
Three Months Ended
Change
Sept. 30, 2021
Jun. 30, 2021
Sept. 30, 2020
Sequential
Year-on-year
Revenue (1)
$
32,431
$
30,490
$
43,375
6
%
(25
)%
Gross margin (1)
$
4,304
$
4,087
$
6,036
5
%
(29
)%
Net (loss) income
$
(4,230
)
$
(2,027
)
$
805
(109
)%
NM
Basic and diluted loss per unit
$
(0.33
)
$
(0.23
)
$
(0.04
)
(43
)%
NM
Adjusted EBITDA (2)
$
545
$
497
$
3,615
10
%
(85
)%
Distributable cash flow (2)
$
(1,232
)
$
(1,446
)
$
(55
)
(15
)%
NM
NM – Not meaningful
(1) Revenue and gross margin have been recast for all periods presented to exclude the results of Cypress Brown Integrity, LLC (“CBI”), which previously represented Cypress’s Pipeline & Process Services segment prior to that segment being reported as a discontinued operation.
(2) 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
“Our third quarter performance showed some sequential improvement from the prior quarter. We are beginning to see signs of a multi-year upcycle driven by much higher commodity prices that benefit all of our customers in the energy industry. The macro fundamentals have clearly strengthened this last quarter with demand recovery for oil, natural gas, and refined products. Absent a recession or pandemic-related setback, these positive dynamics are expected to benefit our industry. I believe that Cypress is uniquely positioned to grow our inspection business in both the energy markets and other new markets including municipal water, sewer, electrical transmission, and renewables,” commented Peter C. Boylan III, Chairman, President, and CEO.
“During the quarter we decided to discontinue our Pipeline & Process Services segment, given its performance, operating losses, and structural challenges in the hydrotesting business. We entered this market in 2015 and struggled over the two subsequent down cycles to consistently earn profits. We have begun a sale process of the remaining assets and will use the proceeds to reduce debt.”
“Federal and State regulations to protect the environment, people, and property continue to grow. In early November The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) announced that it is issuing a final rule that expands Federal pipeline safety oversight to all onshore gas gathering pipelines. These new regulations add more than 400,000 miles of “Gas Gathering” pipelines under federal oversight. The rule, initiated over 10 years ago, expands the definition of a “regulated” gas gathering pipeline that is more than 50 years old. It will, for the first time, apply federal pipeline safety regulations to tens of thousands of miles of unregulated gas gathering pipelines. The final rule will also, for the first time, require pipeline operators to report safety information for all gas gathering lines, representing more than 425,000 additional miles covered by federal reporting requirements.”
“As a market leader, we have an advantaged position with the technology investments we have made over the last several years. We also continue to enjoy an economic competitive advantage with our qualifying income activities and the related tax advantages of our MLP structure in an environment of rising state and federal taxes. During the quarter, we submitted numerous bids for 2022 work in both traditional energy markets and new markets such as municipal water and electrical transmission. ”
SEGMENT UPDATE
Inspection Services
Water & Environmental Services (“Environmental Services”)
Discontinued Operations
COMMON UNIT & PREFERRED UNIT DISTRIBUTIONS
In July 2020, Cypress announced that it had suspended common unit distributions. Cypress’s credit facility, as amended in 2021, now places significant restrictions on the payment of common unit and preferred unit distributions. As a result, Cypress does not expect to pay distributions in the near term; instead, Cypress expects to continue to use available cash to pay down debt and for working capital needs. The preferred units accrue preferred distributions at an annual rate of 9.5%, and the arrearage must be settled before Cypress can resume distributions on its common units.
THIRD QUARTER 2021 OPERATING RESULTS BY BUSINESS SEGMENT
Inspection Services
The Inspection Services segment’s results for the three months ended September 30, 2021 were:
Water & Environmental Services (“Environmental Services”)
The Environmental Services segment’s results for the three months ended September 30, 2021 were:
CAPITALIZATION, LIQUIDITY, AND FINANCING
Cypress had net debt of $50.0 million comprised of outstanding borrowings of $55.3 million on its credit facility and cash and cash equivalents of $5.3 million, inclusive of $1.3 million in cash and cash equivalents classified as assets of discontinued operations on its Unaudited Condensed Consolidated Balance Sheets, at September 30, 2021. The credit facility was amended in August 2021 to eliminate the financial ratio covenants. As part of that amendment, the total capacity of the facility was reduced from $75 million to $70 million. The third quarter results also reflect $0.1 million in costs associated with a financial advisor that the lenders required as part of the amendment.
CAPITAL EXPENDITURES
During the quarter, Cypress had $0.1 million in capital expenditures, inclusive of discontinued operations, which is reflective of its attractive business model that requires minimal capital expenditures.
QUARTERLY REPORT
Cypress filed its quarterly report on Form 10-Q for the three months ended September 30, 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 attributable to limited partners, and preferred unit distributions paid or accrued. 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:
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 public utility industries, including pipeline & infrastructure inspection, nondestructive examination testing, and in-line inspection support 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 the 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 September 30, 2021 and December 31, 2020
(in thousands)
September 30,
December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
4,023
$
12,138
Trade accounts receivable, net
16,504
16,024
Accounts receivable - affiliates
265
-
Assets of discontinued operations
2,878
8,182
Prepaid expenses and other
1,820
2,002
Total current assets
25,490
38,346
Property and equipment:
Property and equipment, at cost
23,426
23,449
Less: Accumulated depreciation
15,850
14,059
Total property and equipment, net
7,576
9,390
Intangible assets, net
13,530
15,143
Goodwill
50,391
50,389
Finance lease right-of-use assets, net
72
112
Operating lease right-of-use assets
1,666
1,987
Debt issuance costs, net
665
242
Assets of discontinued operations
-
3,807
Other assets
540
570
Total assets
$
99,930
$
119,986
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable
$
621
$
855
Accounts payable - affiliates
-
58
Accrued payroll and other
4,618
4,768
Income taxes payable
42
268
Finance lease obligations
51
51
Operating lease obligations
422
439
Current portion of long-term debt
55,329
-
Liabilities of discontinued operations
446
1,582
Total current liabilities
61,529
8,021
Long-term debt
-
62,029
Finance lease obligations
15
55
Operating lease obligations
1,192
1,549
Liabilities of discontinued operations
-
245
Other noncurrent liabilities
362
182
Total liabilities
63,098
72,081
Owners' equity:
Partners’ capital:
Common units (12,339 and 12,213 units outstanding at
September 30, 2021 and December 31, 2020, respectively)
17,180
27,507
Preferred units (5,769 units outstanding at September 30, 2021 and December 31, 2020)
47,390
44,291
General partner
(25,876
)
(25,876
)
Accumulated other comprehensive loss
(2,658
)
(2,655
)
Total partners' capital
36,036
43,267
Noncontrolling interests
796
4,638
Total owners' equity
36,832
47,905
Total liabilities and owners' equity
$
99,930
$
119,986
CYPRESS ENVIRONMENTAL PARTNERS, L.P.
Unaudited Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2021 and 2020
(in thousands, except per unit data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenue
$
32,431
$
43,375
$
89,545
$
153,471
Costs of services
28,127
37,339
77,760
134,772
Gross margin
4,304
6,036
11,785
18,699
Operating costs and expense:
General and administrative
3,888
3,751
12,052
13,688
Depreciation, amortization and accretion
1,094
1,113
3,297
3,248
Loss (gain) on asset disposals, net
9
(2
)
9
5
Operating (loss) income
(687
)
1,174
(3,573
)
1,758
Other (expense) income:
Interest expense
(995
)
(942
)
(2,652
)
(3,182
)
Foreign currency (losses) gains
(140
)
106
5
(167
)
Other, net
89
142
312
401
Net (loss) income before income tax expense
(1,733
)
480
(5,908
)
(1,190
)
Income tax expense
107
266
30
511
Net (loss) income from continuing operations
(1,840
)
214
(5,938
)
(1,701
)
Net (loss) income from discontinued operations, net of tax
(2,390
)
591
(3,466
)
2,010
Net (loss) income
$
(4,230
)
$
805
$
(9,404
)
$
309
Net (loss) income from continuing operations
$
(1,840
)
$
214
$
(5,938
)
$
(1,701
)
Net income attributable to noncontrolling interests - continuing operations
15
3
21
14
Net (loss) income attributable to limited partners - continuing operations
(1,855
)
211
(5,959
)
(1,715
)
Net (loss) income attributable to limited partners - discontinued operations
(1,160
)
351
(1,575
)
1,172
Net (loss) income attributable to limited partners
$
(3,015
)
$
562
$
(7,534
)
$
(543
)
Net (loss) income attributable to limited partners - continuing operations
$
(1,855
)
$
211
$
(5,959
)
$
(1,715
)
Net income attributable to preferred unitholder
1,033
1,033
3,099
3,099
Net loss attributable to common unitholders - continuing operations
(2,888
)
(822
)
(9,058
)
(4,814
)
Net (loss) income attributable to common unitholders - discontinued operations
(1,160
)
351
(1,575
)
1,172
Net loss attributable to common unitholders
$
(4,048
)
$
(471
)
$
(10,633
)
$
(3,642
)
Net (loss) income per common limited partner unit:
Basic and diluted - continuing operations
$
(0.23
)
$
(0.07
)
$
(0.74
)
$
(0.40
)
Basic and diluted - discontinued operations
(0.10
)
0.03
(0.12
)
0.10
Basic and diluted
$
(0.33
)
$
(0.04
)
$
(0.86
)
$
(0.30
)
Weighted average common units outstanding:
Basic and diluted
12,339
12,209
12,307
12,171
Reconciliation of Net (Loss) Income to Adjusted EBITDA and Distributable Cash Flow
Three Months ended
September 30,
Nine Months ended
September 30,
2021
2020
2021
2020
(in thousands)
Net (loss) income
$
(4,230
)
$
805
$
(9,404
)
$
309
Add:
Interest expense
995
942
2,652
3,182
Depreciation, amortization and accretion
1,148
1,222
3,531
3,592
Income tax expense
107
266
30
511
Equity-based compensation
294
211
823
729
Foreign currency losses
140
-
-
167
Discontinued operations (a)
2,091
275
2,598
914
Less:
Foreign currency gains
-
106
5
-
Adjusted EBITDA
$
545
$
3,615
$
225
$
9,404
Adjusted EBITDA attributable to noncontrolling interests
(197
)
368
(615
)
1,274
Adjusted EBITDA attributable to limited partners
$
742
$
3,247
$
840
$
8,130
Less:
Preferred unit distributions paid or accrued
1,033
1,033
3,099
3,099
Cash interest paid, cash taxes paid, and maintenance capital expenditures
941
2,269
3,535
4,463
Distributable cash flow
$
(1,232
)
$
(55
)
$
(5,794
)
$
568
(a)
Amounts include non-cash expenses including loss on asset disposals, depreciation, amortization, and accretion expense, interest expense, and income tax expenses that were previously reported within the Pipeline & Process Services segment, prior to that segment being reported as a discontinued operation.
Reconciliation of Net Loss Attributable to Limited Partners to Adjusted
EBITDA Attributable to Limited Partners and Distributable Cash Flow
Three Months ended
September 30,
Nine Months ended
September 30,
2021
2020
2021
2020
(in thousands)
Net (loss) income attributable to limited partners
$
(3,015
)
$
562
$
(7,534
)
$
(543
)
Add:
Interest expense attributable to limited partners
995
942
2,652
3,182
Depreciation, amortization and accretion attributable to limited partners
1,148
1,222
3,531
3,592
Income tax expense attributable to limited partners
107
266
30
511
Equity based compensation attributable to limited partners
294
211
823
729
Foreign currency losses attributable to limited partners
140
-
-
167
Discontinued operations (a)
1,073
150
1,343
492
Less:
Foreign currency gains attributable to limited partners
-
106
5
-
Adjusted EBITDA attributable to limited partners
742
3,247
840
8,130
Less:
Preferred unit distributions paid or accrued
1,033
1,033
3,099
3,099
Cash interest paid, cash taxes paid and maintenance capital expenditures
attributable to limited partners
941
2,269
3,535
4,463
Distributable cash flow
$
(1,232
)
$
(55
)
$
(5,794
)
$
568
(a)
Amounts include non-cash expenses attributable to limited partners including loss on asset disposals, depreciation, amortization, and accretion expense, interest expense, and income tax expenses that were previously reported within the Pipeline & Process Services segment, prior to that segment being reported as a discontinued operation.
Reconciliation of Net Cash Flows (Used In) Provided by
Operating Activities to Adjusted EBITDA and Distributable
Cash Flow
Nine Months ended
September 30,
2021
2020
(in thousands)
Net cash (used in) provided by operating activities
$
(1,989
)
$
18,216
Changes in trade accounts receivable, net
480
(18,529
)
Changes in prepaid expenses and other
(524
)
640
Changes in accounts payable, accounts payable – affiliates and accounts receivable - affiliates
576
624
Changes in accrued payroll and other
379
6,224
Change in income taxes payable
226
717
Interest expense (excluding non-cash interest)
1,945
2,748
Income tax expense (excluding deferred tax benefit)
30
511
Other
(42
)
(29
)
Discontinued operations (a)
(856
)
(1,718
)
Adjusted EBITDA
$
225
$
9,404
Adjusted EBITDA attributable to noncontrolling interests
(615
)
1,274
Adjusted EBITDA attributable to limited partners
$
840
$
8,130
Less:
Preferred unit distributions paid or accrued
3,099
3,099
Cash interest paid, cash taxes paid, and maintenance capital expenditures
3,535
4,463
Distributable cash flow
$
(5,794
)
$
568
(a)
Amounts include changes in working capital, interest expense, income tax expense, and other amounts that were previously reported within the Pipeline & Process Services segment, prior to that segment being reported as a discontinued operation.
Operating Data
Three Months
Nine Months
Ended September 30,
Ended September 30,
2021
2020
2021
2020
Inspection Services Segment:
Average number of inspectors
474
659
465
792
Average revenue per inspector per week
$
5,055
$
4,842
$
4,758
$
4,809
Inspection Services gross margins
12.3
%
12.2
%
11.4
%
10.7
%
Environmental Services Segment:
Total barrels of saltwater processed (000's)
1,092
1,978
3,911
6,069
Average revenue per barrel
$
0.86
$
0.73
$
0.83
$
0.72
Environmental Services gross margins
47.1
%
64.6
%
59.6
%
63.8
%
Capital expenditures (inclusive of discontinued operations) (000's)
$
75
$
233
$
317
$
1,727
Common unit distributions (000's)
$
-
$
-
$
-
$
2,564
Preferred unit distributions paid (000's)
$
-
$
1,033
$
-
$
3,099
Preferred unit distributions accrued (000's)
$
1,033
$
-
$
3,099
$
-
View source version on businesswire.com: https://www.businesswire.com/news/home/20211115006310/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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