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Form 8-K Nuverra Environmental For: May 05

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May 11, 2015 7:15 AM EDT



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 8-K
__________________________________
  
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
May 5, 2015
  __________________________________
 

Nuverra Environmental Solutions, Inc.
(Exact Name of Registrant as Specified in Charter)
  __________________________________
 
 
 
 
 
Delaware
 
001-33816
 
26-0287117
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
14624 N. Scottsdale Road, Suite #300, Scottsdale, Arizona 85254
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code:
(602) 903-7802
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
__________________________________
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2.):
 
¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02
Results of Operations and Financial Condition
On May 11, 2015, Nuverra Environmental Solutions, Inc. (the "Company") issued a press release announcing its financial results for the first quarter ended March 31, 2015. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information contained in the press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 5.07
Submission of Matters to a Vote of Security Holders
On May 5, 2015, the Company held its 2015 Annual Meeting of Stockholders (the “Annual Meeting”) where three matters were submitted to a vote of the stockholders. The matters are described in greater detail in the Company’s Proxy Statement, filed with the U.S. Securities and Exchange Commission on March 26, 2015. At the Annual Meeting, abstentions and broker non-votes were counted for purposes of determining whether a quorum was present.
At the Annual Meeting, the Stockholders (1) elected the three nominees for Class II director to serve a three-year term expiring on the date of the 2018 annual meeting of Stockholders and the nominee for Class III director to serve a one-year term expiring on the date of the 2016 annual meeting of Stockholders; (2) ratified the appointment of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015; and (3) approved the compensation of the Company’s named executive officers on an advisory (nonbinding) basis. A detailed description of the vote follows.
Proposal 1
The Company’s shareholders elected three nominees for Class II directors with votes as follows:
 
 
For
 
Withheld
 
Broker Non-Votes
Mark D. Johnsrud
 
15,140,712
 
2,064,841
 
6,706,238
William M. Austin
 
16,766,073
 
439,480
 
6,706,238
R. Dan Nelson
 
16,752,418
 
453,135
 
6,706,238
The Company’s shareholders elected one nominee for Class III director with votes as follows:
 
 
For
 
Withheld
 
Broker Non-Votes
J. Danforth Quayle
 
15,097,377
 
2,108,176
 
6,706,238
Proposal 2
The Company’s stockholders ratified the selection of KPMG as the Company’s independent registered public accountant for the fiscal year ending December 31, 2015 with votes as follows:
For
 
Against
 
Abstain
 
Broker Non-Votes
23,684,789
 
179,112
 
47,830
 
—

Proposal 3
The Company’s stockholders approved, on an advisory (nonbinding) basis, the compensation awarded by the Company to its named executive officers with votes as follows:
For
 
Against
 
Abstain
 
Broker Non-Votes
16,946,163
 
220,056
 
39,334
 
6,706,238




Item 9.01
Financial Statements and Exhibits
(d) Exhibits
 
 
 
 
 
Exhibit
Number
 
Description
 
 
 
 
99.1
 
Press Release, dated May 11, 2015







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
 
 
 
 
Date: May 11, 2015
 
 
 
By:
 
/s/ Joseph M. Crabb
 
 
 
 
Name:
 
Joseph M. Crabb
 
 
 
 
Title:
 
Executive Vice President and Chief Legal Officer







EXHIBIT INDEX
 
 
 
 
 
Exhibit
Number
 
Description
 
 
 
 
99.1
 
Press Release, dated May 11, 2015






Exhibit 99.1
 
 
Nuverra Reports First-Quarter 2015 Results
Revenue of $119.1 million, down 7.0% year-over-year
Adjusted EBITDA margin improves 90 basis points to 15.7%
Generates $30.6 million in free cash flow
 
SCOTTSDALE, Ariz. (May 11, 2015) - Nuverra Environmental Solutions, Inc. (NYSE: NES) (“Nuverra” or the “Company”) announced financial and operating results today for the first quarter ended March 31, 2015.
SUMMARY OF RESULTS
▪
Revenue from continuing operations was $119.1 million, compared with $128.0 million in the first quarter of 2014, due to declines in the Rocky Mountain and Southern Divisions, partly offset by growth in the Northeast Division.
▪
Net loss from continuing operations was $12.0 million for the quarter, or a loss of $0.44 per diluted share, compared with a net loss from continuing operations of $11.9 million, or a loss of $0.48 per diluted share, for the first quarter of 2014.
▪
Adjusted net loss from continuing operations, excluding special items, was $11.3 million for the quarter, or a loss of $0.41 per diluted share, compared with adjusted net loss from continuing operations of $8.1 million, or a loss of $0.32 per share in the first quarter of 2014.
▪
First-quarter Adjusted EBITDA from continuing operations was $18.7 million, a 15.7% margin, compared with $18.9 million, a 14.8% margin, in 2014.
▪
Net cash provided by operating activities from continuing operations was $34.8 million for the quarter; free cash flow of $30.6 million.
▪
Days sales outstanding at 65 days at the end of Q1, compared to 71 days at the end of 2014.

Mark D. Johnsrud, Chairman of the Board and Chief Executive Officer, commented, “First-quarter results reflected a decline in drilling and completion activities, primarily in the Bakken, Eagle Ford and Haynesville Shale regions, coupled with some targeted pricing pressures at our larger customers. We anticipated this downturn and prepared by implementing multiple cost-savings initiatives in the first quarter that have contributed to a reduction in overall operating expenses by 10.7% compared with the prior-year period.
“During the quarter, our Rocky Mountain Division experienced the greatest impact from declines in drilling and completion activities, in addition to large customers seeking pricing concessions. Even on reduced revenue, we held Adjusted EBITDA margins steady in the Bakken at 26.4% by actively managing our operating costs,” Mr. Johnsrud explained. “Our Southern Division showed margin improvement, despite decreases in drilling and completion-related revenue, which were offset by growth in water transfer services. The Northeast Division remained level sequentially through the first quarter, with considerable growth year-over-year in revenue and Adjusted EBITDA, reflecting increased activity levels with existing and new customers.
“We continue to operate in a challenging environment, with U.S. drilling activity experiencing an unprecedented decline during the first quarter and into the current quarter. Despite these headwinds, we generated $34.8 million in cash flow from operations and $30.6 million in free cash flow in Q1. We improved our Adjusted EBITDA margin by 90 basis points to 15.7% compared with the same quarter of 2014. While this downturn will continue to put pressure on service providers like Nuverra, we believe our production focus provides us a competitive advantage, and the longer-term outlook for a recovery remains intact,” Mr. Johnsrud said. “Until then, we remain highly focused on optimally managing those things we can control, including targeted cost-saving measures, judicious use of capital and delivering the industry’s best services and safety practices to our customers.”
FIRST QUARTER 2015 HIGHLIGHTS
First-quarter 2015 revenue from continuing operations was $119.1 million, a decrease of $8.9 million or 7.0%, compared with $128.0 million in the first quarter of 2014. The difference was primarily a result of lower water logistics and rental activities in the Rocky Mountain and Southern Divisions, partly offset by increases in water logistics and recycling activities in the Northeast Division, as well as an increase in water transfer activity in the Eagle Ford Shale region.

1


Proactive cost-management initiatives across the organization contributed to a $14.2 million reduction in total expenses in the quarter, or a 10.7% year-over-year decline compared with the first quarter of 2014. Total operating expenses for the first quarter 2015 were $118.9 million, compared with $133.1 million in the first quarter of 2014. Savings were primarily attributable to $3.0 million in lower payroll and related expenses with an associated 8% decline in total headcount, $5.6 million in fuel savings, and $3.6 million in lower amortization expense.
Additionally, working capital improvements in the first quarter totaled more than $27.0 million, led by strong collections from our fourth and first quarter activities. The Company’s continued disciplined capital spending and expense controls provided $30.6 million in free cash flow during the quarter, compared to a negative $6.7 million in the same period in 2014.
During the first quarter, the Company incurred pre-tax restructuring and exit costs of $0.7 million, related primarily to its previously disclosed exit from the MidCon region and other facility closures.
Pre-tax operating income for the first quarter was $0.2 million, representing a $5.3 million improvement when compared with an operating loss of $5.1 million in the first quarter of 2014.
First-quarter 2015 net loss from continuing operations was $12.0 million, or a loss of $0.44 per diluted share, compared with a loss of $11.9 million, or a loss of $0.48 per diluted share, in the first quarter of 2014. Adjusted net loss from continuing operations, excluding special items, was $11.3 million for the quarter, or a loss of $0.41 per diluted share, compared with adjusted net loss from continuing operations of $8.1 million, or a loss of $0.32 per share in the first quarter of 2014. Due to the valuation allowance against deferred tax assets, the Company does not record tax benefits attributable to its pre-tax loss.
Adjusted EBITDA from continuing operations for the first quarter was $18.7 million, a decrease of 1.0% compared with Adjusted EBITDA from continuing operations of $18.9 million in the first quarter of 2014. Adjusted EBITDA margin for the first quarter was 15.7%, compared with 14.8% in the first quarter of 2014. Margins improved due to proactive cost containment activities during 2015. A reconciliation of excluded items and Adjusted EBITDA to the most directly comparable GAAP financial measure can be found in the financial tables included with this press release.
First-quarter income tax benefit was $24,000 at an effective tax rate near 0%, due to the ongoing valuation allowance on deferred tax assets.
Net cash provided by operating activities from continuing operations was $34.8 million in the first quarter of 2015. Net cash capital expenditures from continuing operations for the period were $4.2 million, and related primarily to targeted investments in the TerrafficientSM solids recycling facility and other transportation-related equipment in the Rocky Mountain Division.
As of March 31, 2015, total debt outstanding, excluding $0.6 million of discounts and premiums, was $592.9 million, consisting of $400.0 million of 2018 Notes, $176.5 million outstanding under the revolving credit facility, and $16.4 million in capital leases. Total liquidity was $57.9 million, comprised of $22.4 of net availability under the revolving credit facility and $35.5 million cash on hand.
The Company closed the sale of its subsidiary Thermo Fluids Inc. to Clean Harbors Inc. on April 11, 2015. Net proceeds at closing of $74.6 million from that transaction were applied to pay down a portion of the Company’s revolving credit facility. Following the close of TFI, total debt outstanding was $518.1 million, consisting of $400.0 million of 2018 Notes, $101.8 million outstanding under the amended credit facility, and $16.3 million in capital leases.
On April 13, 2015, the Company entered into an amendment to its credit facility to reduce maximum availability to $195.0 million and removed the accordion feature. Pricing remained the same and no amendment fees were incurred.
As of April 17, 2015, total liquidity was $77.3 million, comprised of $55.4 million of net availability under the revolving credit facility and $21.9 million cash on hand.

2


Division Highlights
A summary of division results follows:
Three Months Ended March 31, 2015
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Revenue
$
69,410

 
$
27,313

 
$
22,389

 
$
—

 
119,112

Operating income (loss)
10,192

 
(98
)
 
(3,014
)
 
(6,832
)
 
248

Operating Margin %
14.7
%
 
(0.4
)%
 
(13.5
)%
 
NA

 
0.2
%
Adjusted EBITDA
18,354

 
3,779

 
2,304

 
(5,731
)
 
18,706

Adjusted EBITDA Margin %
26.4
%
 
13.8
 %
 
10.3
 %
 
NA

 
15.7
%
Three Months Ended March 31, 2014
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Revenue
$
81,906

 
$
19,175

 
$
26,933

 
$
—

 
128,014

Operating income (loss)
8,795

 
(3,048
)
 
(2,232
)
 
(8,586
)
 
(5,071
)
Operating Margin %
10.7
%
 
(15.9
)%
 
(8.3
)%
 
NA

 
(4.0
)%
Adjusted EBITDA
21,731

 
1,513

 
1,541

 
(5,886
)
 
18,899

Adjusted EBITDA Margin %
26.5
%
 
7.9
 %
 
5.7
 %
 
NA

 
14.8
 %
Rocky Mountain Division (Bakken)
In the Rocky Mountain Division, first-quarter revenue decreased 15.3% to $69.4 million, compared with $81.9 million in the first quarter of 2014. The decrease was primarily related to lower overall drilling and completion activities in the Bakken region, which significantly reduced the demand for equipment rentals, as well as water logistics services.
First-quarter Adjusted EBITDA for the Rocky Mountain Division was $18.4 million, a 15.5% decrease, compared with $21.7 million in 2014. First-quarter Adjusted EBITDA margin was 26.4%, compared with a margin of 26.5% in first-quarter 2014.
Northeast Division (Marcellus, Utica)
In the Northeast Division, first-quarter revenue was up 42.4% to $27.3 million, compared with $19.2 million in the first quarter of 2014. The increase was due to overall higher levels of logistics and recycling services, primarily driven by the activities of several large customers in the Marcellus, as well as the addition of a new customer in the Utica.
First-quarter Adjusted EBITDA for the Northeast Division was $3.8 million, a 150% increase, compared with $1.5 million in the first quarter of 2014. First-quarter Adjusted EBITDA margin improved 590 basis points to 13.8%, compared with 7.9% in 2014.
Southern Division (Haynesville, Eagle Ford, Mississippian, Permian)
In the Southern Division, first-quarter revenue decreased 16.9% to $22.4 million, compared with $26.9 million in the first quarter of 2014. The difference was primarily related to an overall decline in fluid logistics and rental services in the MidCon and Haynesville regions, partly offset by an increase in disposal and water midstream services in the Haynesville region, as well as an increase in water transfer activities in the Permian region.
First-quarter Adjusted EBITDA for the Southern Division increased 49.5% to $2.3 million, compared with $1.5 million in the first quarter of fiscal 2014. First-quarter Adjusted EBITDA margin improved 460 basis points to 10.3%, compared with 5.7% in 2014.
Conference Call & Webcast
The Company will host a conference call and webcast to discuss first quarter 2015 results at 12:00 p.m. ET, 9:00 a.m. PT on Monday, May 11, 2015. To participate, please dial +1-877-407-0784 (US) or +1-201-689-8560 (International) and reference conference ID 13608133. The call will be webcast live, and a slide presentation will accompany the call. To access the webcast, go to http://public.viavid.com/index.php?id=114312.


3


An audio replay of the call will be available approximately one hour following the conclusion of the call. The audio replay can be accessed telephonically through May 18, 2015 by dialing +1-877-870-5176 (US) or +1-858-384-5517 (International) and entering access code 13608133, and a replay will be available by accessing the “Investors” section of the Company’s web site at www.nuverra.com.
About Nuverra
Nuverra Environmental Solutions is among the largest companies in the United States dedicated to providing comprehensive and 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 continues to expand 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 on the Company's website, http://www.nuverra.com, and in documents filed with the U.S. Securities and Exchange Commission (SEC) at http://www.sec.gov.
Forward-Looking Statements

This information contained herein includes certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include forecasts of growth, revenues, business activity, adjusted EBITDA, pipeline and solids treatment initiatives, and landfill and treatment facility activities, as well as statements regarding possible acquisitions, divestitures, financings, business growth and expansion opportunities, availability of capital, ability to access capital markets, cost-savings initiatives, expected outcome of litigation and other statements that are not historical facts. Actual results may differ materially from results expressed or implied by these forward-looking statements. All forward-looking statements involve risks and uncertainties, including, difficulties encountered in acquiring and integrating businesses; uncertainties in evaluating goodwill and long-lived assets for potential impairment; potential impact of litigation; risks of successfully consummating expected transactions within the timeframes or on the terms contemplated; uncertainty relating to successful negotiation, execution and consummation of all necessary definitive agreements in connection with our strategic initiatives; whether certain markets grow as anticipated; pricing pressures; risks associated with our indebtedness; current and projected future uncertainties in commodities markets, including low oil and/or natural gas prices; changes in customer drilling and completion activities and capital expenditure plans; shifts in production in shale areas where we operate and/or shale areas where we currently do not have operations; control of costs and expenses; and the competitive and regulatory environment. Additional risks and uncertainties are disclosed from time to time in the Company’s filings with the SEC, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as well as Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Source: Nuverra Environmental Solutions
Nuverra Environmental Solutions, Inc.
Liz Merritt, VP-Investor Relations & Communications
480-878-7452










4





NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
Three Months Ended
 
March 31,
 
2015
 
2014
Revenue:
 
 
 
Non-rental revenue
$
107,010

 
$
109,844

Rental revenue
12,102

 
18,170

Total revenue
119,112

 
128,014

Costs and expenses:
 
 
 
Direct operating expenses
87,999

 
95,379

General and administrative expenses
12,700

 
16,795

Depreciation and amortization
17,482

 
20,911

Other, net
683

 
—

Total costs and expenses
118,864

 
133,085

Operating income (loss)
248

 
(5,071
)
Interest expense, net
(12,588
)
 
(12,050
)
Other income (expense), net
321

 
(420
)
Loss on extinguishment of debt
—

 
(3,177
)
Loss from continuing operations before income taxes
(12,019
)
 
(20,718
)
Income tax benefit
24

 
8,804

Loss from continuing operations
(11,995
)
 
(11,914
)
Income from discontinued operations, net of income taxes
921

 
459

Net loss attributable to common stockholders
$
(11,074
)
 
$
(11,455
)
 
 
 
 
Net loss per common share attributable to common stockholders:
 
 
 
Basic and diluted loss from continuing operations
$
(0.44
)
 
$
(0.48
)
Basic and diluted income from discontinued operations
0.03

 
0.02

Net loss per basic and diluted common share
$
(0.41
)
 
$
(0.46
)
 
 
 
 
Weighted average shares outstanding used in computing net loss per basic and diluted common share
27,412

 
25,020




5





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

 
March 31,
 
December 31,
 
2015
 
2014
Assets
(Unaudited)
 
(Note 1)
Cash and cash equivalents
$
35,486

 
$
13,367

Restricted cash
—

 
114

Accounts receivable, net
86,393

 
108,813

Inventories
4,131

 
4,413

Prepaid expenses and other receivables
5,420

 
4,147

Deferred income taxes
3,033

 
3,179

Other current assets
181

 
173

Current assets held for sale
17,711

 
20,466

Total current assets
152,355

 
154,672

Property, plant and equipment, net
466,414

 
475,982

Equity investments
3,793

 
3,814

Intangibles, net
19,046

 
19,757

Goodwill
104,721

 
104,721

Other assets
16,501

 
17,688

Long-term assets held for sale
97,617

 
94,938

Total assets
$
860,447

 
$
871,572

Liabilities and Equity
 
 
 
Accounts payable
$
14,118

 
$
18,859

Accrued liabilities
53,216

 
43,395

Current portion of contingent consideration
9,409

 
9,274

Current portion of long-term debt
5,128

 
4,863

Financing obligation to acquire non-controlling interest
11,000

 
11,000

Current liabilities of discontinued operations
6,924

 
8,802

Total current liabilities
99,795

 
96,193

Deferred income taxes
3,303

 
3,448

Long-term portion of debt
587,158

 
592,455

Long-term portion of contingent consideration
106

 
550

Other long-term liabilities
3,874

 
3,874

Long-term liabilities of discontinued operations
22,332

 
22,105

Total liabilities
716,568

 
718,625

Commitments and contingencies
 
 
 
Common stock
29

 
29

Additional paid-in capital
1,367,618

 
1,365,537

Treasury stock
(19,726
)
 
(19,651
)
Accumulated deficit
(1,204,042
)
 
(1,192,968
)
Total equity of Nuverra Environmental Solutions, Inc.
143,879

 
152,947

Total liabilities and equity
$
860,447

 
$
871,572


Note 1: The condensed consolidated balance sheet at December 31, 2014 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, 2014.


6



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 
 
Three Months Ended March 31,
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(11,074
)
 
$
(11,455
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Income from discontinued operations, net of income taxes
 
(921
)
 
(459
)
Depreciation
 
16,771

 
16,607

Amortization of intangible assets
 
711

 
4,304

Amortization of deferred financing costs
 
1,207

 
523

Amortization of original issue discounts and premiums, net
 
40

 
36

Stock-based compensation
 
789

 
293

Gain on disposal of property, plant and equipment
 
(654
)
 
(1,255
)
Bad debt expense
 
732

 
773

Loss on extinguishment of debt
 
—

 
3,177

Deferred income taxes
 
1

 
(8,804
)
Other, net
 
(418
)
 
463

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
21,688

 
(14,902
)
Prepaid expenses and other receivables
 
(1,273
)
 
(1,982
)
Accounts payable and accrued liabilities
 
6,949

 
12,523

Other assets and liabilities, net
 
202

 
(215
)
Net cash provided by (used in) operating activities from continuing operations
 
34,750

 
(373
)
Net cash provided by operating activities from discontinued operations
 
867

 
3,409

Net cash provided by operating activities
 
35,617

 
3,036

Cash flows from investing activities:
 
 
 
 
Proceeds from the sale of property, plant and equipment
 
1,968

 
1,551

Purchases of property, plant and equipment
 
(6,163
)
 
(7,743
)
Net cash used in investing activities from continuing operations
 
(4,195
)
 
(6,192
)
Net cash used in investing activities from discontinued operations
 
(161
)
 
(1,050
)
Net cash used in investing activities
 
(4,356
)
 
(7,242
)
Cash flows from financing activities:
 
 
 
 
Proceeds from revolving credit facility
 
—

 
17,725

Payments on revolving credit facility
 
(7,000
)
 
(8,000
)
Payments for deferred financing costs
 
—

 
(343
)
Payments on notes payable and capital leases
 
(1,361
)
 
(1,429
)
Other financing activities
 
(75
)
 
25

Net cash (used in) provided by financing activities from continuing operations
 
(8,436
)
 
7,978

Net cash provided by financing activities from discontinued operations
 
38

 
—

Net cash (used in) provided by financing activities
 
(8,398
)
 
7,978

Net increase in cash and cash equivalents
 
22,863

 
3,772

Cash and cash equivalents - beginning of period
 
15,416

 
9,212

Cash and cash equivalents - end of period
 
38,279

 
12,984

Less: cash and cash equivalents of discontinued operations - end of period
 
2,793

 
2,788

Cash and cash equivalents of continuing operations - end of period
 
$
35,486

 
$
10,196









7





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

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 performance, and evaluates overall management 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), adjusted net income (loss) per share, and operating working capital, in addition to related GAAP financial measures, provides investors with greater transparency to the information used by the Company’s management.

Reconciliation of Loss from Continuing Operations to EBITDA, Adjusted EBITDA from Continuing Operations
and Total Adjusted EBITDA:
 
Three Months Ended March 31,
 
2015
 
2014
Loss from continuing operations
$
(11,995
)
 
$
(11,914
)
Depreciation of property, plant and equipment
16,771

 
16,607

Amortization of intangible assets
711

 
4,304

Interest expense, net
12,588

 
12,050

Income tax benefit
(24
)
 
(8,804
)
EBITDA
18,051

 
12,243

Adjustments:
 
 
 
Transaction-related costs, including earnout adjustments, net
(309
)
 
513

Stock-based compensation
789

 
293

Legal and environmental costs, net
7

 
1,856

Restructuring, exit and other costs
822

 
—

Loss on extinguishment of debt
—

 
3,177

Integration, severance and rebranding costs
—

 
2,072

Gain on disposal of assets
(654
)
 
(1,255
)
Adjusted EBITDA from continuing operations
18,706

 
18,899

Adjusted EBITDA from discontinued operations
1,190

 
3,098

Total Adjusted EBITDA
$
19,896

 
$
21,997



Reconciliation of Income from Discontinued Operations to EBITDA from Discontinued Operations
and Adjusted EBITDA from Discontinued Operations:
 
Three Months Ended March 31,
 
2015
 
2014
Income from discontinued operations
$
921

 
$
459

Income tax expense
265

 
1,696

EBITDA from discontinued operations
1,186

 
2,155

Adjustments:
 
 
 
Transaction-related costs
4

 
1,024

Gain on disposal of assets
—

 
(81
)
Adjusted EBITDA from discontinued operations
$
1,190

 
$
3,098



8



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


Reconciliation of Segment Performance to Adjusted EBITDA

 
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Three months ended March 31, 2015
 
 
 
 
 
 
 
 
 
Revenue
$
69,410

 
$
27,313

 
$
22,389

 
$
—

 
$
119,112

Direct operating expenses
48,425

 
21,496

 
18,078

 
—

 
87,999

General and administrative expenses
2,056

 
1,904

 
2,078

 
6,662

 
12,700

Depreciation and amortization
8,737

 
3,927

 
4,648

 
170

 
17,482

Operating income (loss)
10,192

 
(98
)
 
(3,014
)
 
(6,832
)
 
248

Operating margin %
14.7
%
 
(0.4
)%
 
(13.5
)%
 
NA

 
0.2
%
Income (loss) from continuing operations before income taxes
10,097

 
13

 
(2,935
)
 
(19,194
)
 
(12,019
)
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
10,097

 
$
13

 
$
(2,935
)
 
$
(19,170
)
 
$
(11,995
)
Depreciation and amortization
8,737

 
3,927

 
4,648

 
170

 
17,482

Interest expense, net
109

 
64

 
53

 
12,362

 
12,588

Income tax benefit
—

 
—

 
—

 
(24
)
 
(24
)
EBITDA
$
18,943

 
$
4,004

 
$
1,766

 
$
(6,662
)
 
18,051

 
 
 
 
 
 
 
 
 
 
Adjustments, net
(589
)
 
(225
)
 
538

 
931

 
655

Adjusted EBITDA from continuing operations
$
18,354

 
$
3,779

 
$
2,304

 
$
(5,731
)
 
$
18,706

Adjusted EBITDA margin %
26.4
%
 
13.8
 %
 
10.3
 %
 
NA

 
15.7
%




 
Rocky Mountain
 
Northeast
 
Southern
 
Corporate
 
Total
Three months ended March 31, 2014
 
 
 
 
 
 
 
 
 
Revenue
$
81,906

 
$
19,175

 
$
26,933

 
$
—

 
$
128,014

Direct operating expenses
57,347

 
16,425

 
21,607

 
—

 
95,379

General and administrative expenses
3,095

 
1,924

 
3,353

 
8,423

 
16,795

Depreciation and amortization
12,669

 
3,873

 
4,206

 
163

 
20,911

Operating (loss) income
8,795

 
(3,048
)
 
(2,232
)
 
(8,586
)
 
(5,071
)
Operating margin %
10.7
%
 
(15.9
)%
 
(8.3
)%
 
NA

 
(4.0
)%
Income (loss) from continuing operations before income taxes
8,683

 
(3,235
)
 
(2,667
)
 
(23,499
)
 
(20,718
)
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
8,683

 
$
(3,235
)
 
$
(2,667
)
 
$
(14,695
)
 
$
(11,914
)
Depreciation and amortization
12,669

 
3,873

 
4,206

 
163

 
20,911

Interest expense, net
136

 
73

 
105

 
11,736

 
12,050

Income tax benefit
—

 
—

 
—

 
(8,804
)
 
(8,804
)
EBITDA
$
21,488

 
$
711

 
$
1,644

 
$
(11,600
)
 
$
12,243

 
 
 
 
 
 
 
 
 
 
Adjustments, net
243

 
802

 
(103
)
 
5,714

 
6,656

Adjusted EBITDA from continuing operations
$
21,731

 
$
1,513

 
$
1,541

 
$
(5,886
)
 
$
18,899

Adjusted EBITDA margin %
26.5
%
 
7.9
 %
 
5.7
 %
 
NA

 
14.8
 %


9





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

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

 
Three Months Ended March 31, 2015
 
As Reported
 
Special Items
 
As Adjusted
Revenue
$
119,112

 
$
—

 
$
119,112

Direct operating expenses
87,999

 
654

[A]
88,653

General and administrative expenses
12,700

 
(935
)
[B]
11,765

Operating income
248

 
964

[C]
1,212

Loss from continuing operations
(11,995
)
 
654

[D]
(11,341
)
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(0.44
)
 
 
 
$
(0.41
)
 
 
 
 
 
 
Loss from continuing operations
$
(11,995
)
 
 
 
(11,341
)
Depreciation and amortization
17,482

 
 
 
17,482

Interest expense, net
12,588

 
 
 
12,588

Income tax benefit
(24
)
 
 
 
(23
)
EBITDA and Adjusted EBITDA from continuing operations
$
18,051

 
 
 
$
18,706

Description of 2015 Special Items:
[A]
Special items include a gain on sale related to the disposal of certain transportation related assets.
 
 
[B]
Primarily attributable to to stock-based compensation, and certain refinancing costs associated with our ABL Facility.
 
 
[C]
Primarily includes the aforementioned adjustments, and a charge of approximately $0.7 million associated with Company's restructuring initiative and and other exit related costs from certain shale basins.
 
 
[D]
Primarily includes the aforementioned adjustments, including a net reduction related to a prior acquisition earnout reserve of $0.3 million. Additionally, the Company's effective tax rate for the three months ended March 31, 2015 was zero percent and has been applied to the special items accordingly.
 
 

 
Three Months Ended March 31, 2014
 
As Reported
 
Special Items
 
As Adjusted
Revenue
$
128,014

 
$
—

 
$
128,014

Direct operating expenses
95,379

 
1,255

[E]
96,634

General and administrative expenses
16,795

 
(4,318
)
[F]
12,477

Operating loss
(5,071
)
 
3,063

 
(2,008
)
Loss from continuing operations
(11,914
)
 
3,827

[G]
(8,087
)
 
 
 
 
 
 
Basic and diluted loss from continuing operations
$
(0.48
)
 
 
 
$
(0.32
)
 
 
 
 
 
 
Loss from continuing operations
$
(11,914
)
 
 
 
$
(8,087
)
Depreciation and amortization
20,911

 
 
 
20,911

Interest expense, net
12,050

 
 
 
12,050

Income tax benefit
(8,804
)
 
 
 
(5,975
)
EBITDA and Adjusted EBITDA from continuing operations
$
12,243

 
 
 
$
18,899

Description of 2014 Special Items:
[E]
Special items include a gain on sale related to the disposal of certain transportation related assets.
 
 
[F]
Primarily attributable to costs incurred as a result of our accounting and administrative integration efforts, stock-based compensation, and certain legal expenses associated with our Texas Cases litigation.
 
 
[G]
Primarily includes the aforementioned adjustments, along with a charge of $3.2 million in connection with a write-off of a portion of the unamortized deferred financing costs associated with our Amended Revolving Credit Facility, and a charge of $0.4 million associated with a prior acquisition earnout reserve. Additionally, the Company's effective tax rate for the three months ended March 31, 2014 was -42.5% and has been applied to the special items accordingly.


10


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

Reconciliation of Free Cash Flow from Continuing Operations

 
 
Three Months Ended March 31,
 
 
2015
 
2014
Net cash provided by (used in) operating activities from continuing operations
 
$
34,750

 
$
(373
)
Less: net cash capital expenditures
 
(4,195
)
 
(6,192
)
Free Cash Flow
 
$
30,555

 
$
(6,565
)


11

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