SOURCE: HII Technologies, Inc.

HII Technologies, Inc. Logo

August 07, 2014 16:29 ET

HII Technologies, Inc. Announces Second Quarter 2014 Results

Management to Host Conference Call on Thursday, August 14th at 11:00 am ET

HOUSTON, TX--(Marketwired - August 07, 2014) - HII Technologies, Inc. ("HII Technologies" or "the "Company") (OTCQB: HIIT), an oilfield services company headquartered in Houston, Texas, today announced financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Highlights:

  • Revenues increased 109% to $6.8 million compared to Q2, 2013 due to strong sales from all three divisions
  • Gross Profit increased 112% to $1.8 million compared to Q2, 2013
  • Adjusted EBITDA was $0.04 million and $0.57 million for the quarter and six months ended June 30, 2014, respectively
  • Water division grew its operations to include new activity in the Barnett Shale
  • Signed 7 Master Service Agreements ("MSAs") with new customers

HII Technologies' oilfield services operations are in Texas, Oklahoma, Ohio and West Virginia. The Company is focused on commercializing technologies and providing services in the Water, Safety and Power market segments for exploration and production ("E&P") customers in the domestic United States.

The Company's frac water management services division conducts business through its wholly-owned subsidiaries AES Water Solutions and AquaTex. The water division provides total frac water management solutions associated with the millions of gallons of water typically used during hydraulic fracturing and completions of horizontally drilled oil and gas wells. Frac water management services include water transfer, flow back systems, above-ground tank storage, as well as onsite frac water recycling and evaporation services without the need of trucking or disposal wells. AES Safety Services is the Company's oilfield safety consultancy that provides experienced, trained safety personnel including contract safety engineers during oilfield operations from drilling to completion for E&P customers. Additional services provided under our Safety Services division include training, inspection and environmental remediation services. The Company's oilfield mobile power subsidiary does business as South Texas Power (STP) and operates a fleet of mobile generators, light towers and related equipment for in-field power rental where remote locations provide little or no existing power infrastructure.

 
Second Quarter 2014 Results (ending June 30)
   Q2 2014  Q2 2013  CHANGE
Revenues  $6.8 million  $3.2 million  +109%
Gross Profit  $1.8 million  $0.9 million  +112%
Gross Margin  27.1%  26.8%  +.3%
Income (loss) from Operations  ($0.40 million)  ($0.10 million)  -287%
Adjusted EBITDA(1)  $0.04 million  $0.17 million  -79%
Net Income (Loss)  ($0.64 million)  ($0.37 million)  -72%
       

(1) A reconciliation table of the Adjusted EBITDA for second quarter 2014 is provided below

Revenues for the three months ended June 30, 2014 were $6.8 million, up 109% from $3.2 million in the comparable 2013 period. This increase was primarily attributable to the continued growth within the water division from AES Water Solutions and AquaTex's frac water management services. Additionally, increased revenues came from the organic growth of AES Safety Services, including its new environmental remediation service line and the organic growth of STP's business in mobile oilfield power. The Water division totaled approximately 58% of the quarterly revenues while the Safety and Power divisions totaled about 30% and 12%, respectively, for the second quarter 2014.

"Activity levels in the second quarter continued to be robust in the markets where we operate despite utilization of some of our frac water transfer and flow back equipment being affected by delays from certain customers. While the revenues generated from the second quarter of 2014 increased by more than 100% from the comparable 2013 period, we anticipate accelerated growth in the second half of this year in all divisions," stated Brent Mulliniks, President of AES Water Solutions. "AquaTex's expansion into new areas of Texas where drilling activity is increasing contributed to the improvement in revenue. Existing customers are continuing to rely on our frac water management systems and new Master Services Agreements (MSAs) are being acquired, which provide for more work from new customers in the Permian Basin and West Texas." 

Cost of revenues increased approximately 108% to $4.9 million in the three months end June 30, 2014, or 73% of revenues, compared to cost of revenues of $2.4 million, or 73% of revenues for comparable 2013 period. The Company's gross profit and gross margin were $1.8 million and 27.1%, respectively, in the three months ended June 30, 2014 compared to $0.9 million and 26.8%, respectively, in the three months ended June 30, 2013.

Operating expenses were approximately $2.2 million, or 33% of revenues, for the three months ended June 30, 2014 as compared to $1.0 million, or 30.0% of revenues, in the comparable 2013 period. The increase was primarily attributable to new employees, higher technology testing and development costs and public company expenses. The Company generated an operating loss of $0.40 million in the three months ended 2014 compared to an operating loss of $0.10 million in the comparable 2013 period.

For the three months ended June 30, 2014, the Company had non-GAAP adjusted EBITDA of approximately $0.04 million, (EBITDA defined as earnings before interest, depreciation, amortization, non-cash stock option expenses, and one-time non-operational expense items). A reconciliation table of the adjusted EBITDA is provided below. The net loss for the three months ended June 30 2014 was $0.64 million compared to $0.37 million in the comparable 2013 period. HII Technologies had approximately 49.62 million shares outstanding at July 31, 2014.

 
First Half 2014 Results (ending June 30)
   1H 2014  1H 2013  CHANGE
Revenues  $14.3 million  $5.8 million  +144%
Gross Profit  $4.0 million  $1.4 million  +183%
Gross Margin  27.7%  23.9%  +16%
Income (loss) from Operations  ($0.26 million)  ($0.12 million)  -116%
Adjusted EBITDA(1)  $0.57 million  $0.23 million  +141%
Net Income (Loss)  ($0.67 million)  ($0.49 million)  -36%
       

Balance Sheet and Liquidity

Total assets increased from $10.2 million at December 31, 2013 to $20.6 million at June 30, 2014. The Company had $4.1 million outstanding under its existing $5 million revolving line of credit facility compared to $2.7 million at December 31, 2013. The Company had approximately $5.4 million in other indebtedness at June 30, 2014 as compared to $2.4 million at December 31, 2013. The increase is primarily attributable to conditional sales contracts related to additional equipment purchased.

Cash and cash equivalents were $1.7 million and total current assets were $10.7 million at June 30, 2014 compared to $0.9 million and $5.0 million at December 31, 2013, respectively. Net cash provided by operations improved $0.8 million for the six months ended June 30, 2014 as compared to net cash used in operating activities of $0.4 million for the comparable 2013 period.

From June 21, 2014 through July 8, 2014, the Company sold 4,000 shares of Series A Convertible Preferred Stock at a price of $1,000 per unit ("Units") for gross proceeds of $4,000,000. Each share of preferred stock received common stock warrants to purchase 500 shares of common stock with an exercise price of $1.00 per whole share exercisable for three years after issuance. At June 30, 2014, the Company had received $1,400,000 in gross proceeds. It received the remaining gross proceeds by July 8, 2014. Approximately $0.5 million of the proceeds were used to repay outstanding indebtedness under 10% promissory notes while $0.2 million were paid to registered broker-dealers involved with the Series A Preferred financing. The remaining proceeds will be used for general working capital purposes and to fund future growth opportunities.

Operational Updates

AES Water Solutions & AquaTex

  • The water division added 5 new customers during the quarter and grew its operations to include new activity in the Barnett Shale. Additionally, new sales and field management personnel were added during the quarter to accommodate growth in North Texas.

AES Safety Services

  • The Safety division benefited early in the quarter from additional spill remediation service revenues carried over from the first quarter of 2014. The Safety Engineering consulting business in Ohio and West Virginia continued to enjoy strong activity.

South Texas Power (STP)

  • STP added 2 new key customers and increased revenues during the second quarter from additional rentals business. The Power division initiated some cost cutting measures to improve margins, reduce overhead and developed a long term plan for expansion focused on a total oilfield power management strategy.

"We continued to invest in growth in each of our divisions during the quarter," said Matthew Flemming, CEO of HII Technologies. "The addition of experienced people and recent increases in equipment utilization should continue to fuel organic growth. The Company continues to evaluate new technologies and potential acquisitions in areas where it would be beneficial for the Company's future growth."

For more information and management's discussion and analysis of the quarter results, please see the Company's Quarter Report on Form 10-Q filed August 7, 2014 with the Securities and Exchange Commission.

Investor Conference Call

The Company will host a webcast and conference call with investors at 11:00 am ET on Thursday, August 14th, 2014. CEO Matthew Flemming and President Brent Mulliniks will discuss the company's milestones, growth strategy and financial position.

Date: Thursday, August 14, 2014
Time: 11:00 am ET
Dial-in (US): 1-888-430-8694
Dial-in (International): 1-719-325-2323
Conference ID: 8576336
Webcast: http://public.viavid.com/index.php?id=110424

A replay of the call will be available from August 14, 2014 at 6 PM ET until Sept 14, 2014. To access the replay, use 1 877-870-5176 for U.S. callers and 1 858-384-5517 for international callers. The PIN number is 8576336.

About HII Technologies, Inc.

HII Technologies, Inc. is a Houston, Texas based oilfield services company with operations in Texas, Oklahoma, Ohio and West Virginia. By focusing on the critical service areas of Water, Safety and Power, the Company is positioned to take advantage of the significant anticipated growth in horizontal drilling and hydraulic fracturing within the United States' active shale and unconventional "tight oil" plays. The Company's frac water management division does business as AquaTex and AES Water Solutions, its onsite oilfield contract safety consultancy does business as AES Safety Services, and its mobile oilfield power subsidiary does business as South Texas Power (STP). The holding company, HII Technologies' objective is to bring proven technologies to these operating divisions to build a long-term competitive advantage for its stakeholders. Read more at www.HIITinc.com, www.AquaTexUSA.com, www.AESWaterSolutions.com, www.AESSafetySolutions.com and www.Oilfield-Generators.com.

Non-GAAP Adjusted EBITDA Reconciliation Table

Following is a reconciliation of income from continuing operations attributable to the Company for the three and six months ended June 30, 2014 as presented in accordance with United States generally accepted accounting principles (GAAP) to EBITDA.

     
Q2 2014:Net Loss ($640,554)
 Add back:   
  Interest$176,035 
  Taxes$57,579 
  Depreciation$170,400 
  Non-cash stock expense$188,981 
  One-time non-operational items$84,315 
 Adjusted EBITDA$36,756 
     
1H 2014:Net Loss ($665,405)
 Add back:   
  Interest$315,845 
  Taxes$77,383 
  Depreciation$293,980 
  Non-cash stock expense$243,420 
  One-time non-operational items$300,926 
 Adjusted EBITDA$566,149 
     

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements as to matters that are not of historic fact are forward-looking statements. These forward-looking statements are based on HII's current expectations, estimates and projections about HII, its industry, its management's beliefs and certain assumptions made by management, and include statements regarding estimated capital expenditures, future operational and activity expectations, international growth, and anticipated financial performance in 2014. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these "forward-looking statements" are identified by words such as "expects," "believes," "anticipates" and similar phrases.

Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including, but not limited to: risks that HII will be unable to achieve its financial, capital expenditure and operational projections, including quarterly and annual projections of revenue and/or operating income and risks that HII's expectations regarding future activity levels, customer demand, and pricing stability may not materialize (whether for HII as a whole or for geographic regions and/or business segments individually); risks that fundamentals in the U.S. oil and gas markets may not yield anticipated future growth in HII's businesses, or could further deteriorate or worsen from the recent market declines, and/or that HII could experience further unexpected declines in activity and demand for its hydraulic frac related water transfer business, its safety consultancy business or its generator and related equipment rental service businesses; risks relating to HII's ability to implement technological developments and enhancements; risks relating to compliance with environmental, health and safety laws and regulations, as well as actions by governmental and regulatory authorities; risks that HII may be unable to achieve the benefits expected from acquisition and disposition transactions, and risks associated with integration of the acquired operations into HII's operations; risks, in responding to changing or declining market conditions, that HII may not be able to reduce, and could even experience increases in, the costs of labor, fuel, equipment and supplies employed and used in HII's businesses; risks relating to changes in the demand for or the price of oil and natural gas; risks that HII may not be able to execute its capital expenditure program and/or that any such capital expenditure investments, if made, will not generate adequate returns; and other risks affecting HII's ability to maintain or improve operations, including its ability to maintain prices for services under market pricing pressures, weather risks, and the impact of potential increases in general and administrative expenses.

Because such statements involve risks and uncertainties, many of which are outside of HII's control, HII's actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Other important risk factors that may affect HII's business, results of operations and financial position are discussed in its most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and in other Securities and Exchange Commission filings. Unless otherwise required by law, HII also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. However, readers should review carefully reports and documents that HII files periodically with the Securities and Exchange Commission.

   
   
HII TECHNOLOGIES, INC.  
CONSOLIDATED BALANCE SHEETS  
(unaudited)  
   
   June 30   December 31  
   2014   2013  
            
ASSETS           
Current assets:           
 Cash and cash equivalents  $1,727,514   $866,035  
 Accounts receivable, net of allowance of $79,116 and $79,116   6,270,933    3,708,012  
 Stock subscriptions receivable   2,000,000    -  
 Note receivable   291,790    294,755  
 Current portion of deferred financing costs   181,772    33,541  
 Prepaid expense and other current assets   267,017    111,147  
             
  Total current assets   10,739,026    5,013,490  
            
Property and equipment, net of accumulated depreciation of $332,415 and $133,081   3,179,367    2,076,512  
Assets under capital lease, net   3,195,397    -  
Deposits   33,960    33,960  
Deferred financing costs, net of current portion   16,173    19,949  
Intangible assets, net of accumulated amortization of $40,197 and $0   556,803    227,000  
Goodwill   2,852,107    2,852,107  
            
  Total assets  $20,572,833   $10,223,018  
            
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:           
 Accounts payable  $5,293,984   $3,421,153  
 Accounts payable and other liabilities, related parties   183,000    158,000  
 Accrued expenses and other liabilities   1,638,268    703,302  
 Line of credit   4,082,669    2,678,992  
 Current portion of capital lease obligation   1,054,280    -  
 Current portion of notes payable - related parties   515,000    545,926  
 Current portion of unsecured notes payable   559,655    -  
 Current portion of secured notes payable   261,997    85,000  
             
  Total current liabilities   13,588,853    7,592,373  
            
Long term liabilities:           
 Capital lease obligation, net of current portion   1,533,453    -  
 Notes payable - unsecured   1,000,000    1,000,000  
 Notes payable - secured   116,355    158,855  
 Notes payable - related parties net of current portion   328,459    585,958  
             
  Total liabilities   16,567,120    9,337,186  
            
Commitments and contingencies   -    -  
            
Stockholders' equity           
 Preferred stock, $.001 par value, 10,000,000 shares authorized,           
  Series A Convertible Preferred stock, $1,000 stated value, 4,000 shares authorized, 3,410 and 0 shares issued and outstanding   2,786,981    -  
 Common stock, $.001 par value, 250,000,000 shares authorized, 49,618,556 and 48,424,712 shares issued and outstanding   49,618    48,424  
 Additional paid-in-capital   29,118,134    28,121,023  
 Accumulated deficit   (27,949,020 )  (27,283,615 )
             
  Total stockholders' equity   4,005,713    885,832  
             
  Total liabilities and stockholders' equity  $20,572,833   $10,223,018  
            
            
See accompanying notes to unaudited consolidated financial statements  
  
  
  
HII TECHNOLOGIES, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
For the three and six months ended June 30, 2014 and 2013  
(unaudited)  
   
   For the three months ended   For the six months ended  
   June 30   June 30  
                  
   2014   2013   2014   2013  
                      
REVENUES  $6,752,384   $3,226,437   $14,257,445   $5,836,210  
                      
COST OF REVENUES   4,919,973    2,361,309    10,303,201    4,438,790  
                      
GROSS PROFIT   1,832,411    865,128    3,954,244    1,397,420  
                      
OPERATING EXPENSES:                     
 Selling, general and administrative   2,228,288    913,467    4,215,358    1,464,198  
 Bad debt expense   -    54,000    -    54,000  
                      
 Total operating expenses   2,228,288    967,467    4,215,358    1,518,198  
                      
LOSS FROM OPERATIONS   (395,877 )  (102,339 )  (261,114 )  (120,778 )
                      
OTHER INCOME (EXPENSE)                     
 Loss on debt conversion   (11,063 )  -    (11,063 )  -  
 Loss on extinguishment of liability   -    (96,297 )  -    (96,297 )
 Interest expense, net   (176,035 )  (144,123 )  (315,845 )  (222,574 )
                      
NET LOSS BEFORE INCOME TAXES   (582,975 )  (342,759 )  (588,022 )  (439,649 )
                      
PROVISION FOR INCOME TAXES   (57,579 )  (30,768 )  (77,383 )  (48,267 )
                      
NET LOSS  $(640,554 ) $(373,527 ) $(665,405 ) $(487,916 )
                      
DEEMED DIVIDEND   (623,019 )  -    (623,019 )  -  
                      
CUMULATIVE DIVIDEND   (1,343 )  -    (1,343 )  -  
                      
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS  $(1,264,916 ) $(373,527 ) $(1,289,767 ) $(487,916 )
                      
Basic and diluted net loss per share  $(0.03 ) $(0.01 ) $(0.03 ) $(0.01 )
                      
Weighted average shares outstanding-Basic and diluted   49,134,513    44,429,551    48,847,902    44,087,324  
                      
                      
See accompanying notes to unaudited consolidated financial statements  
  
  
  
HII TECHNOLOGIES, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
For the six months ended June 30, 2014 and 2013  
(unaudited)  
      
   2014   2013  
            
CASH FLOWS FROM OPERATING ACTIVITIES:           
 Net loss  $(665,405 ) $(487,916 )
 Adjustments to reconcile net loss to net           
  cash used in operating activities:           
  Amortization of note payable discount   -    72,582  
  Amortization of deferred finance costs   37,718    -  
  Stock-based compensation   110,420    269,369  
  Stock issued for services   133,000    -  
  Depreciation and amortization   293,980    50,899  
  Loss on extinguishment of liability   -    96,297  
  Loss on debt conversion to common shares   11,063    -  
  Warrants issued for extension of secured note   -    55,154  
  Bad debt recovery   -    54,000  
  Loss on asset disposal   10,581    4,029  
  Changes in:           
   Accounts receivable   (2,562,921 )  (1,390,746 )
   Prepaid expense and other current assets   (70,492 )  40,323  
   Other assets   (82,954 )  (31,500 )
   Accounts payable   2,722,656    778,256  
   Accounts payable and other liabilities - related parties   25,000    (162,248 )
   Accrued expenses and other liabilities   841,821    229,867  
 Net cash provided by (used in) operating activities   804,467    (421,634 )
            
CASH FLOWS FROM INVESTING ACTIVITIES:           
 Cash received from the sale of property and equipment   -    71,754  
 Cash paid for purchase of property and equipment   (1,851,292 )  (48,702 )
 Net cash provided by (used in) investing activities   (1,851,292 )  23,052  
            
CASH FLOWS FROM FINANCING ACTIVITIES:           
 Proceeds from exercise of warrants and options   87,500    50,000  
 Proceeds from sale of preferred shares   1,410,000    -  
 Proceeds from sale-leaseback transaction   -    87,375  
 Payments for deferred financing costs   (182,173 )  (14,500 )
 Proceeds from notes payable   130,000    -  
 Proceeds from line of credit, net   1,403,676    372,400  
 Payments on notes payable   (283,456 )  (354,067 )
 Payments on capital lease obligation   (657,243 )  -  
 Net cash provided by (used in) financing activities   1,908,304    141,208  
            
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   861,479    (257,374 )
            
CASH AND CASH EQUIVALENTS, beginning of period   866,035    379,336  
            
CASH AND CASH EQUIVALENTS, end of period  $1,727,514   $121,962  
            
Supplemental disclosures:           
 Cash paid for income taxes  $36,774   $-  
 Cash paid for interest   237,405    62,846  
            
Noncash investing and financing activities           
 Notes issued in consideration for property and equipment   229,032    -  
 Notes issued in consideration for intangible assets   370,000    -  
 Notes issued for financing of insurance premium   88,900    -  
 Cashless exercise of warrants   117    -  
 Payment on secured note paid directly from line of credit   -    512,600  
 Deferred financing costs paid directly from line of credit   -    49,200  
 Common stock issued for lease deposit   -    31,500  
 Common stock issued for debt   138,303    -  
 Capital lease obligation incurred in consideration for property and equipment   3,244,976    -  
 Accrued issuance costs for preferred stock offering   105,000    -  
 Deemed dividend for preferred stock beneficial conversion feature   623,019    -  
            
See accompanying notes to unaudited consolidated financial statements  

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