EX-99.1 2 ex99-1.htm PRESS RELEASE
 

VERTEX ENERGY, INC. 8-K

Exhibit 99.1

 

 

Vertex Energy Announces First Quarter 2023 Results

 

HOUSTON, TX / BUSINESSWIRE / May 9, 2023 / Vertex Energy, Inc. (NASDAQ:VTNR) (“Vertex” or the “Company”), a leading specialty refiner and marketer of high-quality refined products, today announced its financial results for the first quarter ended March 31, 2023.

 

The Company will host a conference call to discuss first quarter 2023 results today at 8:30 A.M. Eastern Time, details are included at the end of this release.

 

FIRST QUARTER 2023 HIGHLIGHTS

 

●Reported net income of $53.8 million, or $0.71 per basic share

●Reported Adjusted EBITDA of $34.9 million

●Continued safe operation of Mobile Refinery with first quarter 2023 operational results in-line with prior guidance for throughput and capture rate, at 71,328 bpd and 51%, respectively

●Renewable diesel conversion project achieved mechanical completion on March 31, 2023 on schedule, and on budget

●Renewable diesel production startup delayed following failure in feedstock pumping system

●Total cash and cash equivalents of $95.1 million including restricted cash of $8.4 million as of March 31, 2023

 

Vertex reported first quarter 2023 net income of $53.8 million, or $0.71 per basic share, versus a net loss attributable to common shareholders of $4.9 million, or $0.08 loss per basic share for the first quarter 2022. Adjusted EBITDA (see “Non-GAAP Financial Measures”, below) was $34.9 million for the first quarter 2023 compared to Adjusted EBITDA of $13.0 million in the prior-year period. Financial results for the first quarter 2023 include an after-tax, $48.9 million gain on the sale of the Company’s Heartland assets during the quarter. Schedules reconciling the Company’s GAAP and non-GAAP financial results, including Adjusted EBITDA are included later in this release (see also “Non-GAAP Financial Measures”, below).

 

MANAGEMENT COMMENTARY

 

“During the first quarter, we reached an important milestone in the evolution of the Company’s strategic objectives by successfully reaching mechanical completion of our renewable diesel (RD) conversion project both on-time, and budget,” stated Benjamin P. Cowart, President and CEO of Vertex, who continued, “Our first quarter financial results reflect continued smooth, safe operations at the facility, despite the added complexity of concurrent construction activities on the RD project, an achievement I am particularly proud of. Regretfully, we are experiencing a delay in our renewable diesel startup sequence due to a failure in our feedstock pumping system. However, our team is focused on addressing known issues, minimizing impacts, and resuming startup sequencing following repair and reinstallation operations. I have faith in our team’s ability to resolve the issue with minimal delay.”

 

 

 

 

SEGMENT PERFORMANCE (Inclusive of Discontinued Operations)

 

MOBILE REFINERY OPERATIONS

 

The Mobile Refinery operations generated $103.8 million of fuel gross margin (a non-GAAP measure) or $16.17 per barrel during the first quarter 2023, its fourth quarter of operations since being acquired by Vertex. Adjusting for the impact of $2.51 of Renewable Identification Number (RIN) expense per barrel, adjusted fuel gross margin at Mobile was $87.7 million, or $13.66 per barrel.

 

Total throughput at the Mobile Refinery was 71,328 barrels per day in the first quarter, resulting in 95% utilization for the stated operable capacity of approximately 75,000 barrels per day. Total production of finished high-value light products, such as gasoline, diesel and jet fuel, represented approximately 62% of the total production in the first quarter, vs. 74% in the fourth quarter 2022. The shift in product yields to a lower cut of finished refined products reflects the reconfiguration of the facility to accommodate the production of renewable diesel fuel.

 

The benchmark 2-1-1 Gulf Coast crack spread was $31.59 in the first quarter 2023, an increase of 48% versus the first quarter 2022, supported by reduced inventories for refined fuels, a constrained global refining complex and continued strength in demand for conventional refined products. On a gross margin per barrel basis, excluding non-fuel costs, the Mobile Refinery captured $16.17 per barrel or 51% of the Gulf Coast 2-1-1 crack spread, in-line with prior expectations. Adjusting for the per barrel RIN expense, adjusted fuel gross margin per barrel was $13.66 or 43% of the Gulf Coast 2-1-1 crack spread.

 

 

 

 

The following table presents the summary financial and operating results from the Mobile Refinery:

 

        Prior   
  1Q23 4Q22 %Q/Q Guidance
         
Total Throughput (bpd) 71,328 77,964 (9%) 70,500
Total Production (MMbbl) 6.24 7.13 (12%) 6.35
     Facility Capacity Utilization 95% 104% - -
         
Direct Opex Per Barrel ($/bbl) $3.84 $3.98 (4%) $3.93
         
Gross Profit ($/MM) 65.5 89.9 (27%) -
Fuel Gross Margin ($/MM) 103.8 147.1 (29%) -
     RIN Expense 16.1 28.4 (43%) -
Adjusted Fuel Gross Margin ($/MM) 87.7 118.7 (26%) -
         
Fuel Gross Margin Per Barrel ($/bbl) $16.17 $20.50 (21%) -
     RIN Expense Per Barrel $2.51 $3.96 (37%) -
Adjusted Fuel Gross Margin ($/bbl) $13.66 $16.54 (17%) -
         
Gulf Coast 2-1-1 Crack Spread ($/bbl) $31.59 $33.84 (7%) -
Capture Rate 51% 61% - 52%
Adjusted Capture Rate 43% 49% (12%) -
         
Production Yield        
     Gasoline (bpd) 15,723 20,840 (25%) -
          % Production 23% 27% - -
     ULSD (bpd) 14,720 24,489 (40%) -
          % Production 21% 32% - -
     Jet (bpd) 12,789 12,196 5% -
          % Production 18% 16% - -
     Other 26,119 19,956 31% -
          % Production 38% 26% - -
     Total Production (bpd) 69,351 77,481 - -
     Total Production (MMbbl) 6.24 7.13 - -

 

 

 

 

SEGMENT PERFORMANCE

 

Black Oil & Recovery Segment

 

During the 2023 first quarter, the Company’s Marrero (Louisiana) refinery operated at 91% of total utilization. During the first quarter 2023, Vertex sold its Heartland used motor oil collection and recycling business to a wholly-owned subsidiary of GFL Environmental, Inc. (“GFL”), for total cash consideration of $90 million. The transaction was completed pursuant to the entry into a sale and purchase agreement which closed at the time of signing, on February 1, 2023.

 

Under the terms of the transaction, GFL acquired Vertex’s 20 million gallon per year Heartland used motor oil (UMO) refinery in Ohio and the associated Heartland UMO collections business.

 

Renewable Diesel Conversion Project Update

 

Renewable diesel conversion project completed on time and budget. Vertex’s previously disclosed capital project designed to modify the Mobile, Alabama Refinery’s hydrocracking unit to produce renewable diesel fuel on a standalone basis reached mechanical completion on March 31, 2023. Management recently held a ribbon-cutting and commissioning ceremony on April 28, 2023.

 

Startup of renewable diesel facility delayed due to failure in feedstock pumping system. Following the ribbon-cutting ceremony held on April 28, 2023, Vertex transitioned from commissioning to start-up sequencing of its renewable diesel facility. During this start-up process, the facility’s feedstock pumping system suffered a critical equipment failure. This failure is isolated to the feed system with no known impacts to the renewable diesel hydrocracker or conventional refining capabilities. Management has confirmed the availability of the necessary parts for repair of the equipment and anticipates that completion of a full diagnosis, repair, and reinstallation of the equipment will occur within the second half of May 2023, followed by plans to resume startup activities.

 

Balance Sheet and Liquidity Update

 

As of March 31, 2023, Vertex had total debt outstanding of $377.2 million (not including the unamortized discount and deferred financing costs of $77.6 million) including lease obligations of $129.9 million. The Company had total cash and equivalents of $95.1 million including $8.4 million of restricted cash on the balance sheet as of March 31, 2023, for a net debt position of $282.1 million. The ratio of net debt to trailing twelve month Adjusted EBITDA was 1.5x as of March 31, 2023.

 

Management Outlook

 

All guidance presented below is current as of the time of this release and is subject to change. All prior financial guidance should no longer be relied upon.

 

Second Quarter 2023 Financial and Operating Outlook:

 

  2Q 2023
Projections: Low   High
Mobile Refinery Conventional Throughput Volume (Mbpd) 68   72
     Capacity Utilization 91%   96%
       
Direct Operating Expense ($/bbl) $3.80   $4.00
Capture Rate (GC 2-1-1 Crack Spread) (%) 50%   54%
Capital Expenditures ($/MM) $30   $35

 

 

 

 

Commodity Price Risk Management Strategy

 

Vertex may, at times, utilize derivative instruments to manage exposure to fluctuations in various commodity prices, including refined fuel products sold, natural gas used in the refining process, as well as feedstocks and refined products held in inventory. Management sets and implements hedging policies in order to improve visibility on cost inputs, sales prices, and resulting cash flow generation for the purpose of planning and budgeting of the business. 

 

The company currently has no substantial outstanding crack spread derivative hedge positions as of May 9, 2023, and as such, continues to remain exposed to prevailing market spreads and conditions the foreseeable future.

 

CONFERENCE CALL AND WEBCAST DETAILS

 

A conference call will be held today, May 9, 2023 at 8:30 A.M. Eastern Time to review the Company’s financial results, discuss recent events and conduct a question-and-answer session. An audio webcast of the conference call and accompanying presentation materials will also be available in the “Events and Presentation” section of Vertex’s website at www.vertexenergy.com. To listen to a live broadcast, visit 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: 1-888-886-7786
International: 1-416-764-8658

 

To listen to a replay of the teleconference, which will be available through May 15, 2023, either go to the Events and Presentation section of Vertex’s website at www.vertexenergy.com, or call the number below:

 

Domestic Replay: 1-844-512-2921
International: 1-412-317-6671

 

Access ID: 11072292 

 

 

 

 

ABOUT VERTEX ENERGY

 

Houston-based Vertex Energy, Inc. (NASDAQ: VTNR), is an energy transition company focused on the production and distribution of conventional and alternative fuels. Vertex owns a refinery in Mobile (AL) with an operable refining capacity of 75,000 barrels per day and more than 3.2 million barrels of product storage, positioning it as a leading supplier of fuels in the region. Vertex is also one of the largest processors of used motor oil and co-products in the U.S. Gulf Coast. Vertex also owns a facility, Myrtle Grove, located on a 41-acre industrial complex, with hydroprocessing and plant infrastructure along the Gulf Coast in Belle Chasse, LA, that presents high yield, low CAPEX opportunity for future Energy Transition projects. 

 

 

 

 

FORWARD-LOOKING STATEMENTS

 

Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the securities laws, including the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. The important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include, without limitation, the Company’s projected Outlook for the second quarter of 2023, as discussed above; the timing and outcome of the resumed start up of the renewable diesel unit at the Company’s Mobile Refinery (the “Mobile Refinery”); the Company’s ability to raise sufficient capital to complete future capital projects and the terms of such funding, to the extent necessary; the timing of planned capital projects at the Mobile Refinery and the outcome of such projects; the future production of the Mobile Refinery; estimated and actual production and costs associated with the renewable diesel capital project, estimated revenues over the course of the agreement with Idemitsu, anticipated and unforeseen events which could reduce future production at the refinery or delay planned capital projects, changes in commodity and credits values, and certain early termination rights associated with the Idemitsu agreement and conditions precedent to such agreement; certain mandatory redemption provisions of the outstanding senior convertible notes, the conversion rights associated therewith, and dilution caused by such conversions; the Company’s ability to comply with required covenants under outstanding senior notes and a term loan and pay amounts due under such senior notes and term loan, including interest and other amounts due thereunder; the ability of the Company to retain and hire key personnel; risks associated with the ability of Vertex to complete current plans for expansion and growth, and planned capital projects; the level of competition in our industry and our ability to compete; our ability to respond to changes in our industry; the loss of key personnel or failure to attract, integrate and retain additional personnel; our ability to protect our intellectual property and not infringe on others’ intellectual property; our ability to scale our business; our ability to maintain supplier relationships and obtain adequate supplies of feedstocks; our ability to obtain and retain customers; our ability to produce our products at competitive rates; our ability to execute our business strategy in a very competitive environment; trends in, and the market for, the price of oil and gas and alternative energy sources; the impact of inflation on margins and costs; the volatile nature of the prices for oil and gas caused by supply and demand, including volatility caused by the ongoing Ukraine/Russia conflict, increased interest rates, recessions and increased inflation; our ability to maintain our relationships with our partners; the impact of competitive services and products; the outcome of pending and potential future litigation, judgments and settlements; rules and regulations making our operations more costly or restrictive; changes in environmental and other laws and regulations and risks associated with such laws and regulations; economic downturns both in the United States and globally, increases in inflation and interest rates, increased costs of borrowing associated therewith and potential declines in the availability of such funding; risk of increased regulation of our operations and products; disruptions in the infrastructure that we and our partners rely on; interruptions at our facilities; unexpected and expected changes in our anticipated capital expenditures resulting from unforeseen and expected required maintenance, repairs, or upgrades; our ability to acquire and construct new facilities; our ability to effectively manage our growth; decreases in global demand for, and the price of, oil, due to COVID-19, state, federal and foreign responses thereto, inflation, recessions or other reasons, including declines in economic activity or global conflicts; our ability to acquire sufficient amounts of used oil feedstock through our collection routes, to produce finished products, and in the absence of such internally collected feedstocks, and our ability to acquire third-party feedstocks on commercially reasonable terms; expected and unexpected downtime at our facilities; anti-dilutive rights associated with our outstanding securities; our level of indebtedness, which could affect our ability to fulfill our obligations, impede the implementation of our strategy, and expose us to interest rate risk; dependence on third party transportation services and pipelines; risks related to obtaining required crude oil supplies, and the costs of such supplies; counterparty credit and performance risk; unanticipated problems at, or downtime effecting, our facilities and those operated by third parties; risks relating to our hedging activities; and risks relating to planned and future divestitures and acquisitions.

 

 

 

 

Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward-looking statements included in this communication are described in the Company’s publicly filed reports, including, but not limited to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. These reports are available at www.sec.gov. The Company cautions that the foregoing list of important factors is not complete. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements referenced above. Other unknown or unpredictable factors also could have material adverse effects on Vertex’s future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex 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. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. 

 

PROJECTIONS

 

The financial projections (the “Projections”) included herein were prepared by Vertex in good faith using assumptions believed to be reasonable. A significant number of assumptions about the operations of the business of Vertex were based, in part, on economic, competitive, and general business conditions prevailing at the time the Projections were developed. Any future changes in these conditions, may materially impact the ability of Vertex to achieve the financial results set forth in the Projections. The Projections are based on numerous assumptions, including realization of the operating strategy of Vertex; industry performance; no material adverse changes in applicable legislation or regulations, or the administration thereof, or generally accepted accounting principles; general business and economic conditions; competition; retention of key management and other key employees; absence of material contingent or unliquidated litigation, indemnity, or other claims; minimal changes in current pricing; static material and equipment pricing; no significant increases in interest rates or inflation; and other matters, many of which will be beyond the control of Vertex, and some or all of which may not materialize. The Projections also assume the continued uptime of the Company’s facilities at historical levels and the successful funding of, timely completion of, and successful outcome of, planned capital projects. Additionally, to the extent that the assumptions inherent in the Projections are based upon future business decisions and objectives, they are subject to change. Although the Projections are presented with numerical specificity and are based on reasonable expectations developed by Vertex’s management, the assumptions and estimates underlying the Projections are subject to significant business, economic, and competitive uncertainties and contingencies, many of which will be beyond the control of Vertex. Accordingly, the Projections are only estimates and are necessarily speculative in nature. It is expected that some or all of the assumptions in the Projections will not be realized and that actual results will vary from the Projections. Such variations may be material and may increase over time. In light of the foregoing, readers are cautioned not to place undue reliance on the Projections. The projected financial information contained herein should not be regarded as a representation or warranty by Vertex, its management, advisors, or any other person that the Projections can or will be achieved. Vertex cautions that the Projections are speculative in nature and based upon subjective decisions and assumptions. As a result, the Projections should not be relied on as necessarily predictive of actual future events.

 

 

 

 

NON-GAAP FINANCIAL MEASURES

 

In addition to our results calculated under generally accepted accounting principles in the United States (“GAAP”), in this news release we also present EBITDA, Adjusted EBITDA, Adjusted Gross Margin, Fuel Gross Margin, Adjusted Gross Margin Per Throughput Barrel and Fuel Gross Margin Per Throughput Barrel (collectively, the “Non-GAAP Financial Measures”) The Non-GAAP Financial Measures are “non-GAAP financial measures” presented as supplemental measures of the Company’s performance. They are not presented in accordance with GAAP. EBITDA represents net income before interest, taxes, depreciation and amortization, for continued and discontinued operations. Adjusted EBITDA represents net income (loss) from operations (including discontinued operations), plus depreciation and amortization, less income tax benefit and plus interest expense, plus unrealized (gain) loss on hedging activities, plus (gain) loss on hedge roll (backwardation), plus acquisition costs, plus environmental clean-up reserve, plus (gain) on sale of assets, plus (gain) on inventory valuation adjustments, plus (gain) loss on derivative warrant liability, plus stock compensation expense, plus impairment loss plus other income (expense). Adjusted Gross Margin is gross profit (loss) plus unrealized gain or losses on hedging activities and inventory valuation adjustments. Fuel Gross Margin is gross profit (loss) plus operating expenses and depreciation attributable to cost of revenues and other non-fuel items included in costs of revenues including realized and unrealized gain or losses on hedging activities, Renewable Fuel Standard (RFS) costs (mainly related to Renewable Identification Numbers (RINs)), inventory valuation adjustments, fuel financing costs and other revenues and cost of sales items. Fuel Gross Margin Per Barrel of Throughput is calculated as fuel gross margin divided by total throughput barrels for the period presented. Adjusted Gross Margin Per Barrel Throughput is calculated as adjusted gross margin divided by total throughput barrels for the period presented. 

 

The Non-GAAP Financial Measures are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. The Non-GAAP Financial Measures are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use the Non-GAAP Financial Measures as supplements to GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to allocate resources and to compare our performance relative to our peers. Additionally, these measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations. The Non-GAAP Financial Measures are unaudited, and 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: the Non-GAAP Financial Measures do not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments; the Non-GAAP Financial Measures do not reflect changes in, or cash requirements for, working capital needs; the Non-GAAP Financial Measures 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, the Non-GAAP Financial Measures do not reflect any cash requirements for such replacements; the Non-GAAP Financial Measures represent only a portion of our total operating results; and other companies in this industry may calculate the Non-GAAP Financial Measures differently than we do, limiting their usefulness as a comparative measure. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of each of these non-GAAP measures to the most comparable GAAP measure. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measure. For more information on these non-GAAP financial measures, please see the sections titled “Unaudited Reconciliation of Gross Profit From Continued and Discontinued Operations to Adjusted Gross Margin, Adjusted Gross Margin Per Throughput Barrel, Fuel Gross Margin and Fuel Gross Margin Per Throughput Barrel” at the end of this release.

 

CONTACT:

 

IR@vertexenergy.com

 

203-682-8284

 

 

 

 

VERTEX ENERGY, INC.

 

CONSOLIDATED BALANCE SHEETS

 

(in thousands, except number of shares and par value)

 

(UNAUDITED)

 

   March 31,
2023		   December 31,
2022		 
ASSETS          
Current assets          
Cash and cash equivalents  $86,689   $141,258 
Restricted cash   8,429    4,929 
Accounts receivable, net   57,908    34,548 
Inventory   188,026    135,473 
Derivative commodity asset   14    — 
Prepaid expenses and other current assets   52,504    36,660 
Assets held for sale, current   —    20,560 
Total current assets   393,570    373,428 
           
Fixed assets, net   272,310    201,749 
Finance lease right-of-use assets   58,319    44,081 
Operating lease right-of use assets   68,635    53,557 
Intangible assets, net   10,768    11,827 
Deferred taxes assets   —    2,498 
Other assets   2,335    2,245 
TOTAL ASSETS  $805,937   $689,385 
           
LIABILITIES, TEMPORARY EQUITY, AND EQUITY          
Current liabilities          
Accounts payable  $32,001   $20,997 
Accrued expenses   104,196    81,711 
Finance lease liability-current   1,916    1,363 
Operating lease liability-current   13,137    9,012 
Current portion of long-term debt, net   9,609    13,911 
Obligations under inventory financing agreements, net   106,905    117,939 
Derivative commodity liability   —    242 
Liabilities held for sale, current   —    3,424 
        Total current liabilities   267,764    248,599 
           
   Long-term debt, net   161,470    170,010 
Finance lease liability-long-term   59,325    45,164 
Operating lease liability-long-term   55,498    44,545 
Deferred tax liabilities   16,261    — 
Derivative warrant liability   23,455    14,270 
Other liabilities   1,377    1,377 
Total liabilities   585,150    523,965 
           
COMMITMENTS AND CONTINGENCIES (Note 4)   —    — 
           
EQUITY          
           
Common stock, $0.001 par value per share;  
750,000,000 shares authorized; 75,834,826 and 75,668,826 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively. 		   76    76 
Additional paid-in capital   280,126    279,552 
Accumulated deficit   (62,030)   (115,893)
Total Vertex Energy, Inc. shareholders’ equity   218,172    163,735 
Non-controlling interest   2,615    1,685 
Total equity   220,787    165,420 
TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY  $805,937   $689,385 

 

 

 

 

VERTEX ENERGY, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(in thousands, except per share amounts)

 

(UNAUDITED)

 

   Three Months Ended March 31, 
   2023   2022 
Revenues  $691,142   $74,537 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   619,352    60,990 
Depreciation and amortization attributable to costs of revenues   4,337    1,027 
Gross profit   67,453    12,520 
           
Operating expenses:          
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately below)   41,942    12,149 
Depreciation and amortization attributable to operating expenses   1,016    409 
Total operating expenses   42,958    12,558 
Income (loss) from operations   24,495    (38)
Other income (expense):          
Other income   1,653    472 
Loss on change in value of derivative warrant liability   (9,185)   (3,579)
Interest expense   (12,477)   (4,221)
Total other expense   (20,009)   (7,328)
Income (loss) from continuing operations before income tax   4,486    (7,366)
Income tax benefit (expense)   (1,013)   — 
Income (loss) from continuing operations   3,473    (7,366)
Income from discontinued operations, net of tax (see note 23)   50,340    6,557 
Net income (loss)   53,813    (809)
Net loss attributable to non-controlling interest and redeemable non-controlling interest from continuing operations   (50)   (68)
Net income attributable to non-controlling interest and redeemable non-controlling interest from discontinued operations   —    3,807 
Net income (loss) attributable to Vertex Energy, Inc.   53,863    (4,548)
           
Accretion of redeemable noncontrolling interest to redemption value from continued operations   —    (421)
           
Net income (loss) attributable to common shareholders from continuing operations   3,523    (7,719)
Net income attributable to common shareholders from discontinued operations, net of tax   50,340    2,750 
Net income (loss) attributable to common shareholders  $53,863   $(4,969)
           
Basic income (loss) per common share          
Continuing operations  $0.05   $(0.12)
Discontinued operations, net of tax   0.66    0.04 
Basic income (loss) per common share  $0.71   $(0.08)
           
Diluted income (loss) per common share          
Continuing operations  $0.04   $(0.12)
Discontinued operations, net of tax   0.64    0.04 
Diluted income (loss) per common share  $0.68   $(0.08)
           
Shares used in computing earnings per share          
Basic   75,689    63,372 
Diluted   78,996    63,372 

 

 

 

 

VERTEX ENERGY, INC.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

 

(in thousands, except par value)

 

(UNAUDITED)

 

Three Months Ended March 31, 2023
   Common Stock    Series A Preferred                     
   Shares   $0.001 Par   Shares   $0.001 Par   Additional Paid-In Capital   Retained Earnings   Non-controlling Interest   Total Equity 
Balance on January 1, 2023   75,670   $76    —   $—   $279,552   $(115,893)  $1,685   $165,420 
Exercise of options   166    —    —    —    209    —    —    209 
Stock based compensation expense   —    —    —    —    365    —    —    365 
Non controlling shareholder contribution   —    —    —    —    —    —    980    980 
Net income (loss)   —    —    —    —    —    53,863    (50)   53,813 
Balance on March 31, 2023   75,836   $76    —   $—   $280,126   $(62,030)  $2,615   $220,787 

  

Three Months Ended March 31, 2022
   Common Stock   Series A Preferred                     
   Shares   $0.001 Par   Shares   $0.001 Par   Additional Paid-In Capital   Retained Earnings   Non-controlling Interest   Total Equity 
Balance on January 1, 2022   63,288   $63    386   $—   $138,620   $(110,614)  $1,997   $30,066 
Exercise of options   60    —    —    —    76    —    —    76 
Exercise of warrants   1,113    1    —    —    (1)   —    —    — 
Stock based compensation expense   —    —    —    —    250    —    —    250 
Conversion of Series A Preferred stock to common   5    —    (5)   —    —    —    —    — 
Equity component of the convertible note issuance, net   —    —    —    —    78,789    —    —    78,789 
Accretion of redeemable non-controlling interest to redemption value   —    —    —    —    —    (422)   —    (422)
Net income (loss)   —    —    —    —    —    (4,548)   3,739    (809)
Less: amount attributable to redeemable non-controlling interest   —    —    —    —    —    —    (3,769)   (3,769)
Balance on March 31, 2022   64,466   $64    381   $—   $217,734   $(115,584)  $1,967   $104,181 

  

 

 

 

VERTEX ENERGY, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

(UNAUDITED)

 

   Three Months Ended 
   March 31,
2023		   March 31,
2022		 
Cash flows from operating activities          
Net income (loss)  $53,813   $(809)
Income from discontinued operations, net of tax   50,340    6,557 
Income (loss) from continuing operations   3,473    (7,366)
  Adjustments to reconcile net loss from continuing operations to cash used in operating activities          
Stock based compensation expense   365    250 
Depreciation and amortization   5,353    1,436 
Deferred income tax expense   1,013    — 
(Gain) loss on sale of assets   3    (57)
Increase (decrease) in allowance for bad debt   882    (22)
Increase in fair value of derivative warrant liability   9,185    3,579 
(Gain) loss on commodity derivative contracts   (1,516)   3,487 
     Net cash settlements on commodity derivatives   3,519    (5,497)
     Amortization of debt discount and deferred costs   4,572    1,771 
Changes in operating assets and liabilities          
Accounts receivable and other receivables   (26,291)   (4,045)
Inventory   (52,553)   (11,096)
Prepaid expenses and other current assets   (18,103)   (722)
Accounts payable   11,005    11,224 
Accrued expenses   22,486    (304)
     Other assets   (44)   (1,301)
Net cash used in operating activities from continuing operations   (36,651)   (8,663)
Cash flows from investing activities          
Investment in Mobile Refinery assets   —    (6,427)
Purchase of fixed assets   (73,936)   (388)
Proceeds from sale of discontinued operation   87,238    — 
Proceeds from sale of fixed assets   —    132 
Net cash provided by (used in) investing activities from continuing operations   13,302    (6,683)
Cash flows from financing activities          
Payments on finance leases   (310)   (98)
Proceeds from exercise of options and warrants to common stock   209    77 
Contributions received from noncontrolling interest   980    — 
Net change on inventory financing agreements   (11,284)   — 
Payments on note payable   (17,165)   (1,376)
Net cash used in financing activities from continuing operations   (27,570)   (1,397)
           
Discontinued operations:          
Net cash provided by (used in) operating activities   (150)   4,672 
Net cash used in investing activities   —    (9)
Net cash provided by (used in) discontinued operations   (150)   4,663 
           
Net decrease in cash, cash equivalents and restricted cash   (51,069)   (12,080)
Cash, cash equivalents, and restricted cash at beginning of the period   146,187    136,627 
Cash, cash equivalents, and restricted cash at end of period  $95,118   $124,547 

 

 

 

 

VERTEX ENERGY, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

(UNAUDITED)

 

(Continued)

 

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the same amounts shown in the consolidated statements of cash flows (in thousands). 

 

   Three Months Ended 
   March 31,
2023		   March 31,
2022		 
Cash and cash equivalents  $86,689   $24,050 
Restricted cash   8,429    100,497 
Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows  $95,118   $124,547 
           
SUPPLEMENTAL INFORMATION          
Cash paid for interest  $10,124   $15 
Cash paid for taxes  $—   $— 
           
NON-CASH INVESTING AND FINANCING TRANSACTIONS          
Equity component of the convertible note issuance  $—   $78,789 
ROU assets obtained from new finance leases  $15,024   $— 
ROU assets obtained from new operating leases  $15,078   $— 
Accretion of redeemable noncontrolling interest to redemption value  $—   $421 

 

Unaudited segment information for the three months ended March 31, 2023 and 2022 is as follows (in thousands):

 

 

 

 

THREE MONTHS ENDED MARCH 31, 2023
  

Refining &

Marketing

   Black Oil & Recovery   Corporate and Eliminations   Total 
Revenues:                
Refined products  $472,552   $29,423   $(878)  $501,097 
Re-refined products   184,843    3,694    (2,012)   186,525 
Services   1,933    1,587    —    3,520 
Total revenues   659,328    34,704    (2,890)   691,142 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   589,812    30,418    (878)   619,352 
Depreciation and amortization attributable to costs of revenues   3,294    1,043    —    4,337 
Gross profit   66,222    3,243    (2,012)   67,453 
Selling, general and administrative expenses   26,486    4,799    10,657    41,942 
Depreciation and amortization attributable to operating expenses   808    38    170    1,016 
Income (loss) from operations  $38,928   $(1,594)  $(12,839)  $24,495 
                     
Capital expenditures  $69,908   $4,028   $—   $73,936 

 

THREE MONTHS ENDED MARCH  31, 2022
  

Refining &

Marketing

   Black Oil & Recovery   Corporate and Eliminations   Total 
Revenues:                
Refined products  $29,457   $34,952   $—   $64,409 
Re-refined products   5,262    4,315    —    9,577 
Services   —    551    —    551 
Total revenues   34,719    39,818    —    74,537 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   33,086    27,904    —    60,990 
Depreciation and amortization attributable to costs of revenues   123    904    —    1,027 
Gross profit   1,510    11,010    —    12,520 
Selling, general and administrative expenses   1,125    4,123    6,901    12,149 
Depreciation and amortization attributable to operating expenses   105    58    246    409 
Income (loss) from operations  $280   $6,829   $(7,147)  $(38)
                     
Capital expenditures  $—   $388   $—   $388 

 

 

 

 

The following summarized unaudited financial information has been segregated from continuing operations and reported as Discontinued Operations for the three months ended March 31, 2023, and 2022 (in thousands):

 

   Three Months Ended March 31, 
   2023   2022 
Revenues  $7,366   $18,926 
Cost of revenues (exclusive of depreciation shown separately below)   4,589    10,183 
Depreciation and amortization attributable to costs of revenues   124    391 
Gross profit   2,653    8,352 
Operating expenses:          
Selling, general and administrative expenses (exclusive of depreciation shown separately below)   632    1,718 
Depreciation and amortization expense attributable to operating expenses   21    63 
Total operating expenses   653    1,781 
Income from operations   2,000    6,571 
Other income (expense)          
Interest expense   —    (14)
Total other expense   —    (14)
Income before income tax   2,000    6,557 
Income tax expense   (528)   — 
Gain on sale of discontinued operations, net of $17,218 of tax   48,868    — 
Income from discontinued operations, net of tax  $50,340   $6,557 

 

 

 

 

Unaudited segment information for the three months ended March 31, 2023 are as follows (in thousands):

 

Three Months Ended March 31, 2023
In thousands  Total Refining & Marketing   Mobile Refinery   Legacy Refining & Marketing 
Gross profit  $66,222   $65,470   $752 
Unrealized loss on hedging activities  $(637)  $(570)  $(67)
Inventory valuation adjustments   (1,532)   (1,532)   — 
Adjusted gross margin  $64,053   $63,368   $685 
Variable production costs   21,252    21,252    — 
Depreciation and amortization attributable to cost of revenues   3,294    3,144    150 
RINs   16,115    16,115    — 
Realized loss on hedging activities   (470)   (439)   (31)
Financing costs   2,295    2,295    — 
Other revenues   (1,933)   (1,933)   — 
Fuel gross margin  $104,606   $103,802   $804 
Throughput (bpd)        71,328      
Adjusted gross margin per barrel of throughput       $9.87      
Fuel gross margin per barrel of throughput       $16.17      
Variable production costs per barrel of throughput       $3.31      

 

Twelve Months Ended March 31, 2023
In thousands  Total Refining & Marketing   Mobile Refinery   Legacy Refining & Marketing 
Gross profit  $207,945   $206,453   $1,492 
Unrealized loss on hedging activities  $(478)  $(480)  $2 
Inventory valuation adjustments   36,232    36,232    — 
Adjusted gross margin  $243,699   $242,205   $1,494 
Variable production costs   82,385    82,385    — 
Depreciation and amortization attributable to cost of revenues   12,776    12,209    567 
RINs   84,873    84,873    — 
Realized loss on hedging activities   84,733    84,799    (66)
Financing costs   4,306    4,306    — 
Other revenues   (8,544)   (8,544)   — 
Fuel gross margin  $504,228   $502,233   $1,995 
Throughput (bpd)        72,351      
Adjusted gross margin per barrel of throughput       $9.17      
Fuel gross margin per barrel of throughput       $19.02      
Variable production costs per barrel of throughput       $3.12      

 

 

 

 

Unaudited Reconciliation of EBITDA and Adjusted EBITDA to Net loss from Continued and Discontinued Operations

 

   Three Months Ended   Twelve Months Ended   Three Months Ended 
In thousands  March 31, 2023   March 31, 2022   March 31, 2023   March 31, 2022   December 31, 2022 
Consolidated                    
EBITDA and Adjusted EBITDA                         
Net income (loss) including discontinued operations  $53,813   $(809)  $56,619   $(11,435)  $44,418 
Depreciation and amortization   5,498    1,890    22,527    7,599    5,761 
Income tax expense (benefit)   18,759    —    16,270    —    (2,489)
Interest expense   12,477    4,235    88,193    7,891    14,956 
 EBITDA  $90,547   $5,316   $183,609   $4,055   $62,646 
Unrealized (gain)loss hedging activities   (255)   (268)   (133)   (23)   978 
Inventory valuation adjustments   (1,532)   —    49,234    —    9,614 
(Gain) Loss sale of assets   (67,741)   (415)   (67,326)   —      
(Gain) Loss on derivative warrant liability   9,185    3,579    (2,215)   17,484    (33)
Stock compensation expense   365    250    1,689    962    622 
Acquisition costs   4,308    4,560    16,275    11,383    — 
Environmental clean-up reserve   —    —    1,428    —    — 
Impairtment loss   —         —    2,124    — 
Other   —    —    280    (4,637)   1,339 
 Adjusted EBITDA  $34,877   $13,022   $182,842   $31,348   $75,166 

 

   Three Months Ended March 31, 2023 
In thousands  Mobile Refinery   Legacy Refining and Marketing   Total Refining & Marketing   Black Oil and Recovery   Corporate   Consolidated 
Consolidated                        
EBITDA and Adjusted EBITDA                              
Net income (loss) including discontinued operations  $36,177   $(1,125)  $35,052   $2,004   $16,757   $53,813 
Depreciation and amortization   3,880    222    4,102    1,226    170    5,498 
Income tax expense (benefit)   —    —    —    —    18,759    18,759 
Interest expense   3,876    —    3,876    57    8,544    12,477 
EBITDA  $43,933   $(903)  $43,030   $3,287   $44,230   $90,547 
Unrealized (gain)loss hedging activities   (570)   (67)   (637)   382    —    (255)
Inventory valuation adjustments   (1,532)   —    (1,532)   —    —    (1,532)
(Gain) Loss sale of assets   —    —    —    (1,655)   (66,086)   (67,741)
(Gain) Loss on derivative warrant liability   —    —    —    —    9,185    9,185 
Stock compensation expense   —    —    —    —    365    365 
Acquisition costs   —    —    —    —    4,308    4,308 
Adjusted EBITDA  $41,831   $(970)  $40,861   $2,014   $(7,998)  $34,877 

 

 

 

 

   Three Months Ended March 31, 2022 
In thousands  Mobile Refinery 1   Legacy Refining and Marketing   Total Refining & Marketing   Black Oil and Recovery   Corporate   Consolidated 
Consolidated                        
EBITDA and Adjusted EBITDA                              
Net income (loss) including discontinued operations  $—   $280   $280   $13,815   $(14,904)  $(809)
Depreciation and amortization   —    228    228    1,416    246    1,890 
Income tax expense (benefit)   —    —    —    0    —    — 
Interest expense   —    —    —    0    4,235    4,235 
EBITDA  $—   $508   $508   $15,231   $(10,423)  $5,316 
Unrealized (gain)loss hedging activities   —    —    —    (268)   —    (268)
Inventory valuation adjustments   —    —    —    —    —    — 
(Gain) Loss sale of assets   —    —    —    (415)   —    (415)
(Gain) Loss on derivative warrant liability   —    —    —    —    3,579    3,579 
Stock compensation expense   —    —    —    —    250    250 
Acquisition costs   —    —    —    —    4,560    4,560 
Adjusted EBITDA  $—   $508   $508   $14,548   $(2,034)  $13,022 

 

1. The Mobile Refinery was acquired on April 1, 2022.

 

   Twelve Months Ended March 31, 2023 
In thousands  Mobile Refinery   Legacy Refining and Marketing   Total Refining & Marketing   Black Oil and Recovery   Corporate   Consolidated 
Consolidated                        
EBITDA and Adjusted EBITDA                              
Net income (loss) including discontinued operations  $87,424   $(5,413)  $82,011   $4,949   $(30,341)  $56,619 
Depreciation and amortization   15,153    920    16,073    5,630    824    22,527 
Income tax expense (benefit)   —    —    —    —    16,270    16,270 
Interest expense   14,290    —    14,290    (10)   73,913    88,193 
EBITDA  $116,867   $(4,493)  $112,374   $10,569   $60,666   $183,609 
Unrealized (gain)loss hedging activities   (480)   2    (478)   345    —    (133)
Inventory valuation adjustments   36,232    —    36,232    13,002    —    49,234 
(Gain) Loss sale of assets   —    —    —    (1,240)   (66,086)   (67,326)
(Gain) Loss on derivative warrant liability   —    —    —    —    (2,215)   (2,215)
Stock compensation expense   —    —    —    —    1,689    1,689 
Acquisition costs   11,967    —    11,967    4,560    (252)   16,275 
Environmental clean-up reserve   1,428    —    1,428    —    —    1,428 
Other   13,282    —    13,282    (13,222)   220    280 
Adjusted EBITDA  $179,296   $(4,491)  $174,805   $14,014   $(5,978)  $182,841 

 

 

 

 

   Twelve Months Ended March 31, 2022 
In thousands  Mobile Refinery 1   Legacy Refining and Marketing   Total Refining & Marketing   Black Oil and Recovery   Corporate   Consolidated 
Consolidated                        
EBITDA and Adjusted EBITDA                              
Net income (loss) including discontinued operations  $—   $(410)  $(410)  $29,128   $(40,153)  $(11,435)
Depreciation and amortization   —    937    937    5,658    1,005    7,599 
Income tax expense (benefit)   —    —    —    —    —    — 
Interest expense   —    —    —    59    7,832    7,891 
EBITDA  $—   $527   $527   $34,845   $(31,316)  $4,055 
Unrealized (gain)loss hedging activities   —    —    —    (23)   —    (23)
Inventory valuation adjustments   —    —    —    —    —    — 
(Gain) Loss sale of assets   —    —    —    —    —    — 
(Gain) Loss on derivative warrant liability   —    —    —    —    17,484    17,484 
Stock compensation expense   —    —    —    —    962    962 
Acquisition costs   —    —    —    —    11,383    11,383 
Environmental clean-up reserve   —    —    —    —    —    — 
Impairtment loss   —    —    —    —    2,124    2,124 
Other   —    —    —    —    (4,637)   (4,637)
Adjusted EBITDA  $—   $527   $527   $34,822   $(4,000)  $31,348 

                                                 

1. The Mobile Refinery was acquired on April 1, 2022.

 

In thousands  As of 
   March 31, 2023   December 31, 2022 
Consolidated        
Long-Term Debt:          
Senior Convertible Note  $95,178   $95,178 
Term Loan 2025   152,138    165,000 
Finance lease liability long-term   59,325    45,164 
Finance lease liability short-term   1,916    1,363 
Operating lease liability long-term   55,498    44,545 
Operating lease liability short-term   13,137    9,012 
 Long-Term Debt and Lease Obligations  $377,192   $360,262 
Unamortized discount and deferred financing costs   (77,596)   (81,918)
Insurance premiums financed   1,359    5,661 
 Long-Term Debt and Lease Obligations per Balance Sheet  $300,955   $284,005 
Cash and Cash Equivalents   (86,689)   (141,248)
Restricted Cash   (8,429)   (4,929)
Total Cash and Cash Equivalents  $(95,118)  $(146,177)
 Net Long-Term Debt  $282,074   $214,085