Enviva partners, lp reports financial results for first quarter 2015
Bethesda, md.--(business wire)--enviva partners, lp (nyse: eva) (the “partnership”) today reported financial and operating results for the first quarter of 2015. the partnership closed its initial public offering (the “ipo”) on may 4, 2015. included in this earnings release are the financial and operating results of the partnership’s predecessor, enviva, lp (the “predecessor”). summary financial information “we are pleased with the solid performance demonstrated by the partnership in the first quarter of 2015,” stated john keppler, chairman and chief executive officer. “our results during the quarter demonstrate the stability of cash flows generated by our geographically diversified base of operating assets and reflect our ability to deliver strong financial results even amid slightly higher than expected seasonality.” “on a pro forma basis, we generated revenues of $114.3 million. we were able to increase pro forma revenues at a high, single-digit rate of growth when compared to the first quarter of 2014, made possible by improved production levels. total wood pellet sales in the first quarter of 2015 of 583 thousand metric tons were up approximately 10 percent over the same period in 2014. adjusted ebitda improved in the first quarter of 2015 compared to the corresponding period in 2014 due to increased revenue, a stable fixed-cost position, and a favorable mix of customer off-take and marine shipping contract pricing.” pro forma distributable cash flow was $12.5 million for the first quarter of 2015. as detailed in the partnership’s prospectus, beginning with the quarter ending june 30, 2015, the partnership expects to make a minimum quarterly distribution of $0.4125 per common unit and subordinated unit, pro-rated for the period that the partnership was publicly traded. based on the total of 23,810,276 common and subordinated units issued and outstanding as of the closing of the ipo, distribution coverage on the minimum quarterly distribution (without pro-ration) would have exceeded our target of 1.15 times for the first quarter of 2015 on a pro forma basis. “pro forma distributable cash flow also was very strong,” said mr. keppler. “for the quarter, maintenance capital expenses were in line with expectations and the tail of the construction capital expenditures we saw in the prior q1 is now well behind us.” liquidity and financial position the formation and capital transactions described below, including the contribution of cash to the partnership by enviva holdings, lp (the “sponsor”) with enviva pellets cottondale, llc, had the net effect of increasing the predecessor’s cash on hand at the end of the first quarter of 2015 by $62.8 million. total cash on hand is available for general partnership purposes, including potential acquisitions. 2015 outlook and guidance the partnership’s net income for the year ending december 31, 2015 (pro forma for the formation and capital transactions described below) is expected to be in the range of $17.0 million to $21.0 million. the partnership expects adjusted ebitda for the year ending december 31, 2015 to be in the range of $61.0 million to $65.0 million, maintenance capital expenditures to be in the range of $3.0 million to $3.5 million, and cash interest expense to be in the range of $9.5 million to $10.0 million (on a pro forma basis had the new senior secured credit facilities (as defined below) been outstanding for the full year). as mentioned above, the partnership anticipates that a pro-rated distribution for the second quarter will be paid in august 2015 in respect of the period from the ipo closing date of may 4, 2015 through june 30, 2015. sponsor activity our sponsor currently controls a fully operational pellet manufacturing facility in southampton county, va (the “southampton plant”), from which the partnership currently purchases pellets at its port of chesapeake terminal on a fixed-price basis pursuant to a biomass purchase and sale agreement. the partnership expects to be able to acquire this plant, accompanied by a ten-year, 500,000 metric tons per year (“mtpy”) off-take agreement, in late 2015. our sponsor has informed us that it is on schedule with the construction of another approximately 500,000 mtpy production plant in sampson county, nc and a deep-water marine terminal in wilmington, nc with wood pellet throughput capacity of 2,000,000 mtpy. both facilities are expected to begin operations in the first quarter of 2016 and the production plant is expected to ramp up to its full production capacity over the ensuing six months. the partnership expects to have the opportunity to acquire the production plant, together with a ten-year, 420,000 mtpy off-take agreement, in late 2016 and the port in 2017. irs proposed regulations on qualifying income on may 5, 2015, the internal revenue service (the “irs”) and u.s. department of treasury (“treasury”) issued proposed regulations under section 7704(d)(1)(e) of the internal revenue code of 1986, as amended (the “code”), addressing the scope of qualifying income from the processing, refining, and transportation of minerals or natural resources (the “proposed regulations”). section 7704 of the code provides that a publicly traded partnership is treated as a corporation unless 90 percent or more of its income meets the “qualifying income requirement.” the predecessor requested and obtained a favorable private letter ruling from the irs in 2011 to the effect that, based on the facts presented in the private letter ruling request, its income from processing timber feedstocks into pellets and transporting, storing, marketing, and distributing such timber feedstocks and wood pellets constitutes “qualifying income” within the meaning of section 7704 of the code. the proposed regulations explicitly reaffirm that the partnership’s timber feedstock and wood pellet activities generate qualifying income. formation and capital transactions on april 9, 2015, in connection with the closing of the partnership’s new $199.5 million senior secured credit facilities (the “senior secured credit facilities”), the partnership, the predecessor, and the sponsor executed a series of transactions that were accounted for as common control transactions (referred to as the “reorganization”). under a contribution agreement, the predecessor conveyed 100 percent of the issued and outstanding limited liability company interest in enviva pellets southampton, llc, which owns the southampton plant, to a joint venture operated by the sponsor (the “hancock jv”). under a separate contribution agreement by and among the sponsor and affiliates of the sponsor, the predecessor, and the partnership, the parties executed the following transactions: the predecessor distributed cash and cash equivalents of $1.7 million and accounts receivable of $2.4 million to the sponsor; the sponsor contributed 100 percent of its limited liability interest in enviva pellets cottondale, llc, which owns a wood pellet production plant in cottondale, florida, to the partnership; and the sponsor contributed its interest in the predecessor and enviva gp, llc to the partnership. on april 9, 2015, the partnership entered into a biomass purchase and sale agreement, pursuant to which the hancock jv sells to the partnership wood pellets sourced from the production at the southampton plant on a fixed-price basis. the wood pellets purchased from the hancock jv are sold to the partnership’s customers under existing off-take contracts. the partnership entered into the credit agreement providing for the senior secured credit facilities and used $82.2 million of the proceeds to repay all outstanding indebtedness under the predecessor’s pre-existing senior secured credit facility and related accrued interest. as a result of the reorganization, the partnership is the owner of the predecessor, enviva gp, llc, and enviva pellets cottondale, llc. on may 4, 2015, the partnership completed the ipo. the ipo’s net proceeds of approximately $215.1 million, after deducting the underwriting discount, structuring fee, and estimated offering expenses, were used to (i) repay existing subsidiary debt in the amount of approximately $83.0 million and (ii) distribute approximately $86.7 million to the sponsor related to its contribution of assets to the partnership in connection with the ipo, with the partnership retaining $45.4 million for general partnership purposes. at the closing of the ipo on may 4, 2015, the consolidated financial statements of the predecessor became the consolidated financial statements of the partnership. conference call the partnership will host a conference call with executive management related to its first quarter 2015 results at 10:00 a.m. (eastern time) on thursday, june 4, 2015. information on how interested parties may listen to the conference call is available in the investor relations section of our website (www.envivapartners.com). a replay of the conference call will be available on our website after the live call concludes. about enviva partners, lp enviva partners, lp (nyse: eva) is a publicly traded, growth-oriented master limited partnership. enviva partners is the world’s largest supplier by production capacity of utility-grade wood pellets to major power generators serving customers in europe, asia, and the united states. enviva partners owns and operates midstream fuel processing and logistics assets, including five wood pellet production plants in the southeastern u.s. that have a combined wood pellet production capacity of approximately 1.7 million metric tons per year and a dry-bulk, deep-water marine terminal at the port of chesapeake, va. in addition to exports from this mid-atlantic terminal, enviva partners maintains export terminal operations in mobile, alabama and panama city, florida. to learn more about enviva partners, please visit our website at www.envivapartners.com. non-gaap financial measures we view adjusted gross margin per metric ton, adjusted ebitda, and distributable cash flow as important indicators of performance. adjusted gross margin per metric ton we define adjusted gross margin per metric ton as gross margin per metric ton excluding depreciation and amortization included in cost of goods sold. we believe adjusted gross margin per metric ton is a meaningful measure because it compares our off-take pricing to our operating costs for a view of profitability and performance on a per metric ton basis. adjusted gross margin per metric ton primarily will be affected by our ability to meet targeted production volumes and to control direct and indirect costs associated with procurement and delivery of wood fiber to our production plants and the production and distribution of wood pellets. adjusted ebitda we define adjusted ebitda as net income or loss, excluding depreciation and amortization, interest expense, taxes, early retirement of debt obligation, non-cash equity compensation, and asset impairments and disposals. adjusted ebitda is a supplemental measure used by our management and other users of our financial statements, such as investors, commercial banks, and research analysts, to assess the financial performance of our assets without regard to financing methods or capital structure. distributable cash flow we define distributable cash flow as adjusted ebitda less cash paid for interest and maintenance and expansion capital expenditures. distributable cash flow is used as a supplemental measure by our management and other users of our financial statements as it provides important information regarding the relationship between our financial operating performance and our ability to make cash distributions. adjusted gross margin per metric ton, adjusted ebitda, and distributable cash flow are not financial measures presented in accordance with generally accepted accounting principles (“gaap”). we believe that the presentation of these non-gaap financial measures provides useful information to investors in assessing our financial condition and results of operations. our non-gaap financial measures should not be considered as alternatives to the most directly comparable gaap financial measures. each of these non-gaap financial measures has important limitations as analytical tools because they exclude some, but not all, items that affect the most directly comparable gaap financial measures. you should not consider adjusted gross margin per metric ton, adjusted ebitda, or distributable cash flow in isolation or as substitutes for analysis of our results as reported under gaap. our definitions of these non-gaap financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. the following tables present a reconciliation of adjusted gross margin per metric ton, adjusted ebitda, and distributable cash flow to the most directly comparable gaap financial measure, as applicable, for each of the periods indicated. (1) excludes depreciation of office furniture and equipment. such amount is included in general and administrative expenses. the following table provides a reconciliation of the estimated range of adjusted ebitda to the estimated range of net income, in each case for the year ending december 31, 2015 (in millions): year endingdecember 31, 2015 pro forma statements of operations applicable pro forma amounts presented in the table below combine the unaudited historical results of the predecessor, the results of the partnership’s initial public offering, and the related formation and capital transactions described above, including borrowings under the partnership’s new $199.5 million senior secured credit facilities, as if such transactions had closed on january 1, 2014. envivapartners, lppro forma envivapartners, lppro forma cautionary note concerning forward-looking statements certain statements and information in this press release, including those concerning expected results for the year ending december 31, 2015, may constitute “forward-looking statements.” the words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. these forward-looking statements are based on the partnership’s current expectations and beliefs concerning future developments and their potential effect on the partnership. although management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments affecting the partnership will be those that it anticipates. the forward-looking statements involve significant risks and uncertainties (some of which are beyond the partnership’s control) and assumptions that could cause actual results to differ materially from the partnership’s historical experience and its present expectations or projections. important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to: (i) the amount of products that the partnership is able to produce, which could be adversely affected by, among other things, operating difficulties; (ii) the volume of products that the partnership is able to sell; (iii) the price at which the partnership is able to sell products; (iv) changes in the price and availability of natural gas, coal, or other sources of energy; (v) changes in prevailing economic conditions; (vi) the partnership’s ability to complete acquisitions, including acquisitions from its sponsor; (vii) unanticipated ground, grade, or water conditions; (viii) inclement or hazardous weather conditions, including extreme precipitation, temperatures, and flooding; (ix) environmental hazards; (x) fires, explosions, or other accidents; (xi) changes in domestic and foreign laws and regulations (or the interpretation thereof) related to renewable or low-carbon energy, the forestry products industry, or power generators; (xii) inability to acquire or maintain necessary permits; (xiii) inability to obtain necessary production equipment or replacement parts; (xiv) technical difficulties or failures; (xv) labor disputes; (xvi) late delivery of raw materials; (xvii) inability of the partnership’s customers to take delivery or their rejection of a delivery of products; (xviii) changes in the price and availability of transportation; and (xix) the partnership’s ability to borrow funds and access capital markets. for additional information regarding known material factors that could cause the partnership’s actual results to differ from projected results, please read its filings with the securities and exchange commission, including the prospectus filed on april 29, 2015 and the quarterly report on form 10-q for the quarter ended march 31, 2015. readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. the partnership undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise. financial statements december 31,2014
