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EX-10.1 - EXHIBIT 10.1 - Nuverra Environmental Solutions, Inc.nesc_ex101xtwelfthamendment.htm
8-K - 8-K - Nuverra Environmental Solutions, Inc.nesc_8-kx20160930.htm


Exhibit 99.1
 
 
ex991image1a05.jpg

NUVERRA ANNOUNCES THIRD-QUARTER AND YEAR-TO-DATE 2016 RESULTS
SCOTTSDALE, AZ (November 7, 2016) - Nuverra Environmental Solutions, Inc. (OTCQB: NESC) (“Nuverra” or the “Company”) today announced financial and operating results for the third quarter and nine months ended September 30, 2016.
SUMMARY OF QUARTERLY RESULTS
Third quarter revenue was $35.4 million, an increase of approximately 4.3%, or $1.4 million, when compared with revenue of $34.0 million in the second quarter of 2016, and a 53.7% decrease, or $41.1 million, when compared with revenue of $76.5 million in the third quarter of 2015.
Total costs and expenses, adjusted for special items, were $47.5 million, or a 2.8% decrease when compared with $48.9 million in the second quarter of 2016; 45.3% reduction in total costs and expenses, adjusted for special items, when compared with the third quarter of 2015.
Loss from continuing operations for the third quarter was $38.4 million, or a loss of $0.30 per diluted share, compared with a loss from continuing operations of $40.6 million, or a loss of $0.60 per diluted share, in the second quarter of 2016.
Adjusted EBITDA from continuing operations for the third quarter was $3.4 million, an increase of $3.1 million compared with adjusted EBITDA from continuing operations of $0.3 million in the second quarter of 2016.
Total liquidity as of September 30, 2016 was $8.9 million.

THIRD QUARTER 2016 RESULTS
Third quarter revenue was $35.4 million, an increase of $1.4 million, or 4.3%, from $34.0 million in the second quarter of 2016. Revenue increased sequentially across all three operating divisions based upon a mix of pricing and activity improvement as rig counts began to rebound from second quarter lows. In the third quarter of 2015, the Company reported revenue of $76.5 million.
The Company continued to reduce costs and expenses in the third quarter as a result of proactive cost-management initiatives in response to the prolonged depression in oil and natural gas prices and corresponding impact on our business operations. Total costs and expenses, adjusted for special items, were $47.5 million, a 2.8% decrease compared with total costs and expenses, adjusted for special items, of $48.9 million in the second quarter of 2016. The Company reported total costs and expenses, adjusted for special items, of $87.0 million in the third quarter of 2015.
On a year-over-year comparison with the third quarter of 2015, the $39.5 million reduction in total costs and expenses, adjusted for special items, included:
Approximately $18.8 million in lower payroll and related expenses, reflecting a 43.0% year-over-year reduction in headcount;
Approximately $3.5 million in lower fuel expense;
Approximately $3.9 million, or 44.7%, in lower general and administrative expenses;
Approximately $1.7 million in lower depreciation and amortization expenses; with,
The balance of $11.6 million related to reductions in all other direct operating expenses.

For the third quarter of 2016, the Company reported a net loss from continuing operations of $38.4 million, or a loss of $0.30 per diluted share. Special items in the third quarter totaled approximately $12.1 million and primarily included $7.8 million for asset impairment charges, partially offset by a $1.6 million gain on the change in fair value of the derivative warrant liability. Additionally, special items included the loss on the sale of underutilized assets, non-recurring legal and professional fees, and stock-based compensation expense. Excluding the impact of these special items, third quarter loss from continuing operations was $26.3 million, or a loss of $0.20 per diluted share. This compares with a loss from continuing operations, adjusted for special items, of $29.4 million, or a loss of $0.43 per diluted share in the second quarter of 2016. The Company reported a loss from continuing operations, adjusted for special items, of $22.5 million, or a loss of $0.81 per diluted share, in the third quarter of 2015.

1



Adjusted EBITDA from continuing operations for the third quarter was $3.4 million, an increase of $3.1 million compared with adjusted EBITDA of $0.3 million in the second quarter of 2016. Third quarter adjusted EBITDA margin from continuing operations was 9.7%, compared with an adjusted EBITDA margin of 0.9% in the second quarter of 2016. The Company reported adjusted EBITDA from continuing operations of $6.3 million and an adjusted EBITDA margin of 8.2% in the third quarter of 2015.
YEAR-TO-DATE RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 ("YTD")
YTD revenue was $116.4 million, a decrease of $171.7 million, or 59.6%, from $288.1 million for the same period in 2015. The decrease was attributable to lower overall drilling and completion activities coupled with continued pricing pressures in all divisions.
YTD net loss from continuing operations was $106.3 million, or a loss of $1.41 per diluted share, compared with a loss of $160.8 million, or a loss of $5.82 per diluted share, for the same period in 2015. Excluding special items, YTD adjusted loss from continuing operations was $82.1 million, or a loss of $1.09 per diluted share, compared with adjusted loss from continuing operations of $52.3 million, or a loss of $1.89 per diluted share in 2015. The $24.2 million in YTD special items primarily included $10.3 million in legal and professional fees associated with the Company’s exchange offer and related debt restructuring activities, $10.5 million for asset impairment charges, partially offset by a $1.7 million gain on the sale of Underground Solutions, Inc., and a $2.6 million gain on the change in fair value of the derivative warrant liability. Additionally, special items included the loss on the sale of underutilized assets, severance-related charges, stock-based compensation expense, and the write off of a portion of the unamortized deferred financing costs associated with an amendment to the asset-based revolving credit facility (the “ABL Facility”).
YTD adjusted EBITDA from continuing operations was $5.3 million, a decrease of 85.8% when compared with the same period in 2015. Adjusted EBITDA margin for the 2016 YTD period was 4.6%, compared with 12.9% in the same period of 2015.
CASH FLOW AND LIQUIDITY
Net cash used in operating activities from continuing operations during nine months ended September 30, 2016 was $19.3 million, while asset sales net of capital expenditures from continuing operations provided proceeds of $7.3 million. For the nine months ended September 30, 2016, free cash flow was negative at $12.0 million, compared with positive free cash flow of $51.4 million in the same period in 2015.
Total liquidity as of September 30, 2016, consisting almost entirely of available borrowings under the ABL Credit Facility, was $8.9 million.
As of September 30, 2016, total debt outstanding was $469.9 million, including $40.4 million of 2018 Notes, $346.0 million of 2021 Notes, $25.5 million under a term loan, $43.9 million under the ABL Facility, and $14.1 million in capital leases and notes payable. The Company made cumulative payments, net of proceeds received, during the nine months ended September 30, 2016 of $57.9 million to reduce total debt outstanding under the ABL Facility.
About Nuverra
Nuverra Environmental Solutions is among the largest companies in the United States dedicated to providing comprehensive, full-cycle environmental solutions to customers in the energy market. Nuverra focuses on the delivery, collection, treatment, recycling, and disposal of restricted solids, water, wastewater, waste fluids and hydrocarbons. The Company provides its suite of environmentally compliant and sustainable solutions to customers who demand stricter environmental compliance and accountability from their service providers. Find additional information about Nuverra in documents filed with the U.S. Securities and Exchange Commission (SEC) at http://www.sec.gov.
Forward-Looking Statements
This press release contains "forward-looking" statements, including, without limitation, those that involve risks and uncertainties, including statements regarding (i) the expected timing and benefits of any future restructuring transactions and alternatives to improve our long-term capital structure and (ii) the expected timing for completing the refinancing of our asset-based revolving credit facility. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements. Forward-looking statements may be identified by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “might,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target,” or similar expressions, and variations or negatives of these words. There can be no assurance

2



that all or any portion of any future restructuring transactions will be consummated on the terms summarized herein or at all, and any such restructuring transactions may not permit us to meet scheduled debt service obligations, which would cause us to default on our debt obligations. In the event we cannot meet our scheduled debt service obligations or otherwise default on our debt obligations, we may need to seek relief under the United States Bankruptcy Code. The forward-looking statements contained, or incorporated by reference, herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's views as of the filing date. The Company undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, changes in expectations or otherwise.
Source: Nuverra Environmental Solutions, Inc.
602-903-7802
ir@nuverra.com

- Tables to Follow -





3



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Non-rental revenue
$
32,143

 
$
71,000

 
$
107,538

 
$
263,540

Rental revenue
3,298

 
5,528

 
8,856

 
24,527

Total revenue
35,441

 
76,528

 
116,394

 
288,067

Costs and expenses:
 
 
 
 
 
 
 
Direct operating expenses
32,122

 
62,482

 
101,022

 
222,055

General and administrative expenses
6,323

 
8,705

 
27,979

 
31,102

Depreciation and amortization
15,019

 
16,687

 
46,070

 
52,465

Impairment of long-lived assets
7,788

 

 
10,452

 

Impairment of goodwill

 
104,721

 

 
104,721

Other, net

 
2

 

 
1,114

Total costs and expenses
61,252

 
192,597

 
185,523

 
411,457

Operating loss
(25,811
)
 
(116,069
)
 
(69,129
)
 
(123,390
)
Interest expense, net
(14,656
)
 
(12,097
)
 
(40,674
)
 
(37,137
)
Other income, net
2,095

 
22

 
5,024

 
743

Loss on extinguishment of debt

 

 
(674
)
 
(1,011
)
Loss from continuing operations before income taxes
(38,372
)
 
(128,144
)
 
(105,453
)
 
(160,795
)
Income tax (expense) benefit
(24
)
 
31

 
(852
)
 
40

Loss from continuing operations
(38,396
)
 
(128,113
)
 
(106,305
)
 
(160,755
)
Gain (loss) from discontinued operations, net of income taxes

 
350

 
(1,235
)
 
(818
)
Net loss attributable to common shareholders
$
(38,396
)
 
$
(127,763
)
 
$
(107,540
)
 
$
(161,573
)
 
 
 
 
 
 
 
 
Net loss per common share attributable to common shareholders:
 
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(0.30
)
 
$
(4.61
)
 
$
(1.41
)
 
$
(5.82
)
Basic and diluted income (loss) from discontinued operations

 
0.01

 
(0.02
)
 
(0.03
)
Net loss per basic and diluted common share
$
(0.30
)
 
$
(4.60
)
 
$
(1.43
)
 
$
(5.85
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding used in computing net loss per basic and diluted common share
129,669

 
27,807

 
75,291

 
27,634





4



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
September 30,
 
December 31,
 
2016
 
2015
Assets
 
 
(Note 1)
Cash and cash equivalents
$
587

 
$
39,309

Restricted cash
1,087

 
4,250

Accounts receivable, net
22,188

 
42,188

Inventories
2,580

 
2,985

Prepaid expenses and other receivables
3,468

 
3,377

Other current assets
958

 
2,372

Assets held for sale
582

 

Total current assets
31,450

 
94,481

Property, plant and equipment, net
340,797

 
406,188

Equity investments
573

 
3,750

Intangibles, net
14,905

 
16,867

Other assets
573

 
1,333

Total assets
$
388,298

 
$
522,619

Liabilities and Shareholders' Deficit
 
 
 
Accounts payable
$
4,206

 
$
6,907

Accrued liabilities
18,281

 
29,843

Current contingent consideration

 
8,628

Current portion of long-term debt
51,315

 
499,709

Derivative warrant liability
4,426

 

Total current liabilities
78,228

 
545,087

Deferred income taxes
340

 
270

Long-term debt
405,461

 
11,758

Long-term contingent consideration
8,500

 

Other long-term liabilities
3,738

 
3,775

Total liabilities
496,267

 
560,890

Commitments and contingencies
 
 
 
Shareholders' deficit:
 
 
 
Common stock
152

 
30

Additional paid-in capital
1,407,650

 
1,369,921

Treasury stock
(19,809
)
 
(19,800
)
Accumulated deficit
(1,495,962
)
 
(1,388,422
)
Total shareholders' deficit
(107,969
)
 
(38,271
)
Total liabilities and shareholders' deficit
$
388,298

 
$
522,619


Note 1: The condensed consolidated balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.





5



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(107,540
)
 
$
(161,573
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
   Income from discontinued operations, net of income taxes

 
(906
)
   Loss on the sale of TFI
1,235

 
1,724

   Depreciation and amortization of intangible assets
46,070

 
52,465

   Amortization of debt issuance costs, net
4,329

 
3,638

   Accrued interest added to debt principal
20,240

 

   Stock-based compensation
908

 
1,858

   Impairment of long-lived assets
10,452

 

   Impairment of goodwill

 
104,721

   Gain on sale of UGSI
(1,747
)
 

   Loss (gain) on disposal of property, plant and equipment
3,298

 
(1,198
)
   Bad debt expense
(516
)
 
(695
)
   Change in fair value of derivative warrant liability
(2,574
)
 

   Loss on extinguishment of debt
674

 
1,011

   Deferred income taxes
70

 
21

   Other, net
5

 
364

   Changes in operating assets and liabilities:
 
 
 
      Accounts receivable
20,516

 
58,985

      Prepaid expenses and other receivables
(227
)
 
(1,294
)
      Accounts payable and accrued liabilities
(14,379
)
 
(4,805
)
      Other assets and liabilities, net
(136
)
 
1,342

Net cash (used in) provided by operating activities from continuing operations
(19,322
)
 
55,658

Net cash used in operating activities from discontinued operations

 
(708
)
Net cash (used in) provided by operating activities
(19,322
)
 
54,950

Cash flows from investing activities:
 
 
 
   Proceeds from the sale of TFI

 
78,897

   Proceeds from the sale of property, plant and equipment
9,954

 
12,339

   Purchases of property, plant and equipment
(2,613
)
 
(16,564
)
   Proceeds from the sale of UGSI
5,032

 

   Change in restricted cash
3,163

 
(4,250
)
Net cash provided by investing activities from continuing operations
15,536

 
70,422

Net cash used in investing activities from discontinued operations

 
(181
)
Net cash provided by investing activities
15,536

 
70,241

Cash flows from financing activities:
 
 
 
   Proceeds from revolving credit facility
118,533

 

   Payments on revolving credit facility
(176,428
)
 
(81,647
)
   Proceeds from term loan
24,000

 

   Payments for deferred financing costs
(1,084
)
 

   Issuance of stock
5,000

 

   Payments on vehicle financing and other financing activities
(4,957
)
 
(9,468
)
Net cash used in financing activities from continuing operations
(34,936
)
 
(91,115
)
Net cash used in financing activities from discontinued operations

 
(105
)
Net cash used in financing activities
(34,936
)
 
(91,220
)
Net (decrease) increase in cash and cash equivalents
(38,722
)
 
33,971

Cash and cash equivalents - beginning of period
39,309

 
15,416

Cash and cash equivalents - end of period
587

 
49,387

Less: cash and cash equivalents of discontinued operations - end of period

 

Cash and cash equivalents of continuing operations - end of period
$
587

 
$
49,387

 
 
 
 

6



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(In thousands)
(Unaudited)


This press release contains non-GAAP financial measures as defined by the rules and regulations of the United States Securities and Exchange Commission. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations or balance sheets of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are included in the attached financial tables.
 
These non-GAAP financial measures are provided because management of the Company uses these financial measures in maintaining and evaluating the Company’s ongoing financial results and trends. Management uses this non-GAAP information as an indicator of business results, and evaluates overall performance with respect to such indicators. Management believes that excluding items such as acquisition expenses, amortization of intangible assets, stock-based compensation, asset impairments, restructuring charges, expenses related to litigation and resolution of lawsuits, and other charges, which may or may not be non-recurring, among other items that are inconsistent in amount and frequency (as with acquisition expenses), or determined pursuant to complex formulas that incorporate factors, such as market volatility, that are beyond our control (as with stock-based compensation), for purposes of calculating these non-GAAP financial measures facilitates a more meaningful evaluation of the Company’s current operating performance and comparisons to the past and future operating performance. The Company believes that providing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share, in addition to related GAAP financial measures, provides investors with greater transparency to the information used by the Company’s management. These non-GAAP financial measures are not substitutes for measures of performance or liquidity calculated in accordance with GAAP and may not necessarily be indicative of the Company's liquidity or ability to fund cash needs. Not all companies calculate non-GAAP financial measures in the same manner, and our presentation may not be comparable to the presentations of other companies.




7



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)


Reconciliation of Loss from Continuing Operations to EBITDA, Adjusted EBITDA from Continuing Operations and Total Adjusted EBITDA:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Loss from continuing operations
$
(38,396
)
 
$
(128,113
)
 
$
(106,305
)
 
$
(160,755
)
Depreciation and amortization
15,019

 
16,687

 
46,070

 
52,465

Interest expense, net
14,656

 
12,097

 
40,674

 
37,137

Income tax expense (benefit)
24

 
(31
)
 
852

 
(40
)
EBITDA
(8,697
)
 
(99,360
)
 
(18,709
)
 
(71,193
)
Adjustments:
 
 
 
 
 
 
 
Transaction-related costs, including earnout adjustments, net

 
(13
)
 
(117
)
 
(145
)
Stock-based compensation
252

 
342

 
908

 
1,858

Change in fair value of derivative warrant liability
(1,551
)
 

 
(2,574
)
 

Legal and environmental costs, net
3,387

 
134

 
13,504

 
538

Impairment of long-lived assets
7,788

 

 
10,452

 

Impairment of goodwill

 
104,721

 

 
104,721

Restructuring, exit and other costs
(266
)
 
326

 
(379
)
 
1,661

Loss on extinguishment of debt

 

 
674

 
1,011

Gain on sale of UGSI
(53
)
 

 
(1,747
)
 

Loss (gain) on disposal of assets
2,566

 
114

 
3,293

 
(1,198
)
Adjusted EBITDA from continuing operations
3,426

 
6,264

 
5,305

 
37,253

Adjusted EBITDA from discontinued operations

 

 

 
1,197

Total Adjusted EBITDA
$
3,426

 
$
6,264

 
$
5,305

 
$
38,450



Reconciliation of Loss from Discontinued Operations to EBITDA from Discontinued Operations and Adjusted EBITDA from Discontinued Operations:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Loss from discontinued operations
$

 
$
350

 
$
(1,235
)
 
$
(818
)
Income tax expense

 

 

 
265

EBITDA from discontinued operations

 
350

 
(1,235
)
 
(553
)
Adjustments:
 
 
 
 
 
 
 
Transaction-related costs

 

 

 
26

Loss on sale of TFI

 
(350
)
 
1,235

 
1,724

Adjusted EBITDA from discontinued operations
$


$


$


$
1,197




8



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)

Reconciliation of QTD Segment Performance to Adjusted EBITDA

Three months ended September 30, 2016
 
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Revenue
 
$
19,166

 
$
7,877

 
$
8,398

 
$

 
$
35,441

Direct operating expenses
 
13,890

 
9,311

 
8,921

 

 
32,122

General and administrative expenses
 
1,211

 
346

 
455

 
4,311

 
6,323

Depreciation and amortization
 
7,554

 
3,281

 
4,121

 
63

 
15,019

Operating loss
 
(3,489
)
 
(10,733
)
 
(7,215
)
 
(4,374
)
 
(25,811
)
Operating margin %
 
(18.2
)%
 
(136.3
)%
 
(85.9
)%
 
NA

 
(72.8
)%
Loss from continuing operations before income taxes
 
(3,618
)
 
(10,384
)
 
(7,265
)
 
(17,105
)
 
(38,372
)
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
(3,618
)
 
(10,384
)
 
(7,311
)
 
(17,083
)
 
(38,396
)
Depreciation and amortization
 
7,554

 
3,281

 
4,121

 
63

 
15,019

Interest expense, net
 
150

 
118

 
53

 
14,335

 
14,656

Income tax expense (benefit)
 

 

 
46

 
(22
)
 
24

EBITDA
 
$
4,086

 
$
(6,985
)
 
$
(3,091
)
 
$
(2,707
)
 
$
(8,697
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments, net
 
(206
)
 
7,094

 
4,746

 
489

 
12,123

Adjusted EBITDA from continuing operations
 
$
3,880

 
$
109

 
$
1,655

 
$
(2,218
)
 
$
3,426

Adjusted EBITDA margin %
 
20.2
 %
 
1.4
 %
 
19.7
 %
 
NA

 
9.7
 %

Three months ended September 30, 2015
 
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Revenue
 
$
41,325

 
$
19,825

 
$
15,378

 
$

 
$
76,528

Direct operating expenses
 
30,938

 
16,414

 
15,130

 

 
62,482

General and administrative expenses
 
1,823

 
791

 
703

 
5,388

 
8,705

Depreciation and amortization
 
8,553

 
4,041

 
3,985

 
108

 
16,687

Operating loss
 
(104,710
)
 
(1,421
)
 
(4,441
)
 
(5,497
)
 
(116,069
)
Operating margin %
 
(253.4
)%
 
(7.2
)%
 
(28.9
)%
 
NA

 
(151.7
)%
Loss from continuing operations before income taxes
 
(104,811
)
 
(1,569
)
 
(4,474
)
 
(17,290
)
 
(128,144
)
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
(104,811
)
 
(1,563
)
 
(4,470
)
 
(17,269
)
 
(128,113
)
Depreciation and amortization
 
8,553

 
4,041

 
3,985

 
108

 
16,687

Interest expense, net
 
110

 
146

 
48

 
11,793

 
12,097

Income tax benefit
 

 
(6
)
 
(4
)
 
(21
)
 
(31
)
EBITDA
 
$
(96,148
)
 
$
2,618

 
$
(441
)
 
$
(5,389
)
 
$
(99,360
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments, net
 
104,590

 
(12
)
 
1,181

 
(135
)
 
105,624

Adjusted EBITDA from continuing operations
 
$
8,442

 
$
2,606

 
$
740

 
$
(5,524
)
 
$
6,264

Adjusted EBITDA margin %
 
20.4
 %
 
13.1
 %
 
4.8
 %
 
NA

 
8.2
 %



9



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)

Reconciliation of YTD Segment Performance to Adjusted EBITDA

Nine months ended September 30, 2016
 
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Revenue
 
$
63,023

 
$
28,342

 
$
25,029

 
$

 
$
116,394

Direct operating expenses
 
49,680

 
29,005

 
22,337

 

 
101,022

General and administrative expenses
 
4,758

 
1,875

 
2,348

 
18,998

 
27,979

Depreciation and amortization
 
23,425

 
10,590

 
11,854

 
201

 
46,070

Operating loss
 
(14,840
)
 
(21,153
)
 
(13,937
)
 
(19,199
)
 
(69,129
)
Operating margin %
 
(23.5
)%
 
(74.6
)%
 
(55.7
)%
 
NA

 
(59.4
)%
Loss from continuing operations before income taxes
 
(15,088
)
 
(20,984
)
 
(14,016
)
 
(55,365
)
 
(105,453
)
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
(15,088
)
 
(20,984
)
 
(14,062
)
 
(56,171
)
 
(106,305
)
Depreciation and amortization
 
23,425

 
10,590

 
11,854

 
201

 
46,070

Interest expense, net
 
354

 
368

 
139

 
39,813

 
40,674

Income tax expense
 

 

 
46

 
806

 
852

EBITDA
 
$
8,691

 
$
(10,026
)
 
$
(2,023
)
 
$
(15,351
)
 
$
(18,709
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments, net
 
2,508

 
8,820

 
4,548

 
8,138

 
24,014

Adjusted EBITDA from continuing operations
 
$
11,199

 
$
(1,206
)
 
$
2,525

 
$
(7,213
)
 
$
5,305

Adjusted EBITDA margin %
 
17.8
 %
 
(4.3
)%
 
10.1
 %
 
NA

 
4.6
 %

Nine months ended September 30, 2015
 
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Revenue
 
$
158,336

 
$
74,549

 
$
55,182

 
$

 
$
288,067

Direct operating expenses
 
115,470

 
59,906

 
46,679

 

 
222,055

General and administrative expenses
 
5,201

 
3,716

 
4,000

 
18,185

 
31,102

Depreciation and amortization
 
26,091

 
12,028

 
13,828

 
518

 
52,465

Operating loss
 
(93,147
)
 
(1,224
)
 
(9,923
)
 
(19,096
)
 
(123,390
)
Operating margin %
 
(58.8
)%
 
(1.6
)%
 
(18.0
)%
 
NA

 
(42.8
)%
Loss from continuing operations before income taxes
 
(92,909
)
 
(1,756
)
 
(10,037
)
 
(56,093
)
 
(160,795
)
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
(92,909
)
 
(1,756
)
 
(10,037
)
 
(56,053
)
 
(160,755
)
Depreciation and amortization
 
26,091

 
12,028

 
13,828

 
518

 
52,465

Interest expense, net
 
363

 
646

 
142

 
35,986

 
37,137

Income tax benefit
 

 

 

 
(40
)
 
(40
)
EBITDA
 
$
(66,455
)
 
$
10,918

 
$
3,933

 
$
(19,589
)
 
$
(71,193
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments, net
 
104,015

 
134

 
1,050

 
3,247

 
108,446

Adjusted EBITDA from continuing operations
 
$
37,560

 
$
11,052

 
$
4,983

 
$
(16,342
)
 
$
37,253

Adjusted EBITDA margin %
 
23.7
 %
 
14.8
 %
 
9.0
 %
 
NA

 
12.9
 %

10



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)


Reconciliation of Special Items to Adjusted Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations


 
Three months ended September 30, 2016
 
As Reported
 
Special Items
 
As Adjusted
Revenue
$
35,441

 
$

 
 
$
35,441

Direct operating expenses
32,122

 
(4,394
)
[A]
 
27,728

General and administrative expenses
6,323

 
(1,545
)
[B]
 
4,778

Total costs and expenses
61,252

 
(13,727
)
[C]
 
47,525

Operating loss
(25,811
)
 
13,727

[C]
 
(12,084
)
Loss from continuing operations
(38,396
)
 
12,131

[D]
 
(26,265
)
 
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(0.30
)
 
 
 
 
$
(0.20
)
 
 
 
 
 
 
 
Loss from continuing operations
$
(38,396
)
 
 
 
 
$
(26,265
)
Depreciation and amortization
15,019

 
 
 
 
15,019

Interest expense, net
14,656

 
 
 
 
14,656

Income tax expense
24

 
 
 
 
16

EBITDA and Adjusted EBITDA from continuing operations
$
(8,697
)
 
 
 
 
$
3,426

Description of 2016 Special Items:
[A]
Special items primarily includes the loss on sale of underutilized assets, offset by severance and environmental clean-up charges.
[B]
Primarily attributable to stock-based compensation, non-routine legal and professional fees offset by a settlement for the Rocky Mountain division.
[C]
Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $2.1 million for assets classified as assets-held-for-sale in the Southern division and $5.7 million for assets determined to be impaired in the Northeast division.
[D]
Primarily includes the aforementioned adjustments along with a gain of $1.6 million associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the three months ended September 30, 2016 was 0.06% and has been applied to the special items accordingly.

11



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)


Reconciliation of Special Items to Adjusted Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations


 
Three months ended September 30, 2015
 
As Reported
 
Special Items
 
As Adjusted
Revenue
$
76,528

 
$

 
 
$
76,528

Direct operating expenses
62,482

 
(846
)
[E]
 
61,636

General and administrative expenses
8,705

 
(68
)
[F]
 
8,637

Total costs and expenses
192,597

 
(105,637
)
[G]
 
86,960

Operating loss
(116,069
)
 
105,637

[G]
 
(10,432
)
Loss from continuing operations
(128,113
)
 
105,624

[H]
 
(22,489
)
 
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(4.61
)
 
 
 
 
$
(0.81
)
 
 
 
 
 
 
 
Loss from continuing operations
$
(128,113
)
 
 
 
 
$
(22,489
)
Depreciation and amortization
16,687

 
 
 
 
16,687

Interest expense, net
12,097

 
 
 
 
12,097

Income tax benefit
(31
)
 
 
 
 
(31
)
EBITDA and Adjusted EBITDA from continuing operations
$
(99,360
)
 
 
 
 
$
6,264

Description of 2015 Special Items:
[E]
Special items include a gain on sale related to the disposal of certain transportation related assets.
[F]
Primarily attributable to stock-based compensation, non-routine litigation expenses, and a gain related to the sale of assets.
[G]
Primarily includes the aforementioned adjustments, and approximately $104.7 million associated with a goodwill impairment charge recorded for the Rocky Mountain division.
[H]
Primarily includes the aforementioned adjustments. Additionally, our effective tax rate for the three months ended September 30, 2015 was near zero percent and has been applied to the special items accordingly.
















12



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)


Reconciliation of Special Items to Adjusted Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations


 
Nine months ended September 30, 2016
 
As Reported
 
Special Items
 
As Adjusted
Revenue
$
116,394

 
$

 
 
$
116,394

Direct operating expenses
101,022

 
(5,633
)
[A]
 
95,389

General and administrative expenses
27,979

 
(11,704
)
[B]
 
16,275

Total costs and expenses
185,523

 
(27,789
)
[C]
 
157,734

Operating loss
(69,129
)
 
27,789

[C]
 
(41,340
)
Loss from continuing operations
(106,305
)
 
24,208

[D]
 
(82,097
)
 
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(1.41
)
 
 
 
 
$
(1.09
)
 
 
 
 
 
 
 
Loss from continuing operations
$
(106,305
)
 
 
 
 
$
(82,097
)
Depreciation and amortization
46,070

 
 
 
 
46,070

Interest expense, net
40,674

 
 
 
 
40,674

Income tax expense
852

 
 
 
 
658

EBITDA and Adjusted EBITDA from continuing operations
$
(18,709
)
 
 
 
 
$
5,305


Description of 2016 Special Items:
[A]
Special items primarily includes the loss on sale of underutilized assets, offset by severance and environmental clean-up charges.
[B]
Primarily attributable to stock-based compensation and non-routine legal and professional fees incurred in connection with the execution of management's plan to restructure our indebtedness.
[C]
Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $4.8 million for assets classified as assets-held-for-sale in the Northeast and Southern divisions and $5.7 million for assets determined to be impaired in the Northeast division.
[D]
Primarily includes the aforementioned adjustments along with a charge of $0.7 million in connection with the write-off of a portion of the unamortized deferred financing costs as a result of amendments to the ABL Facility, a gain of $2.6 million associated with the change in fair value of the derivative warrant liability, and a gain on the sale of Underground Solutions, Inc. of $1.7 million. Additionally, our effective tax rate for the nine months ended September 30, 2016 was 0.8% and has been applied to the special items accordingly.

13



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)


Reconciliation of Special Items to Adjusted Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations


 
Nine months ended September 30, 2015
 
As Reported
 
Special Items
 
As Adjusted
Revenue
$
288,067

 
$

 
 
$
288,067

Direct operating expenses
222,055

 
469

[E]
 
222,524

General and administrative expenses
31,102

 
(2,214
)
[F]
 
28,888

Total costs and expenses
411,457

 
(107,580
)
[G]
 
303,877

Operating loss
(123,390
)
 
107,580

[G]
 
(15,810
)
Loss from continuing operations
(160,755
)
 
108,446

[H]
 
(52,309
)
 
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(5.82
)
 
 
 
 
$
(1.89
)
 
 
 
 
 
 
 
Loss from continuing operations
$
(160,755
)
 
 
 
 
$
(52,309
)
Depreciation and amortization
52,465

 
 
 
 
52,465

Interest expense, net
37,137

 
 
 
 
37,137

Income tax benefit
(40
)
 
 
 
 
(40
)
EBITDA and Adjusted EBITDA from continuing operations
$
(71,193
)
 
 
 
 
$
37,253

Description of 2015 Special Items:
[E]
Special items include a gain on sale related to the disposal of certain transportation related assets.
[F]
Primarily attributable to stock-based compensation, non-routine litigation expenses, certain refinancing costs associated with our ABL Facility and a gain related to the sale of assets.
[G]
Primarily includes the aforementioned adjustments, along with a charge of approximately $1.1 million associated our restructuring initiative and other exit related costs from certain shale basins, and approximately $104.7 million associated with a goodwill impairment charge recorded for the Rocky Mountain division.
[H]
Primarily includes the aforementioned adjustments, along with a charge of $1.0 million in connection with the write-off of a portion of the unamortized deferred financing costs as a result of an amendment to our ABL Facility, and a net reduction related to a prior acquisition earnout reserve of $0.1 million. Additionally, our effective tax rate for the nine months ended September 30, 2015 was near zero percent and has been applied to the special items accordingly.

14



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)

Reconciliation of Free Cash Flow from Continuing Operations

 
 
Nine Months Ended
 
 
September 30,
 
 
2016
 
2015
Net cash (used in) provided by operating activities from continuing operations
 
$
(19,322
)
 
$
55,658

Less: net cash capital expenditures [1]
 
7,341

 
(4,225
)
Free Cash Flow
 
$
(11,981
)
 
$
51,433


[1]
Purchases of property, plant and equipment, net of proceeds received from sales of property, plant and equipment


15