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):
August 7, 2014
Nuverra Environmental Solutions, Inc.
(Exact Name of Registrant as Specified in Charter)
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| Delaware |
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001-33816 |
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26-0287117 |
| (State or Other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(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 August 7, 2014, Nuverra
Environmental Solutions, Inc. issued a press release announcing its financial results for the second quarter ended June 30, 2014. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information contained herein and in the accompanying exhibit shall not be deemed filed for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth
by specific reference in such a filing.
| Item 9.01. |
Financial Statements and Exhibits |
(d) Exhibits
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| Exhibit
Number |
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Description |
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| 99.1 |
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Press Release, dated August 7, 2014 |
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.
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC. |
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| Date: August 7, 2014 |
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By: |
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/s/ Joseph M. Crabb |
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Name: |
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Joseph M. Crabb |
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Title: |
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Executive Vice President and Chief Legal Officer |
EXHIBIT INDEX
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| Exhibit
Number |
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Description |
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| 99.1 |
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Press Release, dated August 7, 2014 |
Exhibit 99.1
Nuverra Environmental Solutions Reports Second Quarter 2014 Results
SCOTTSDALE, Ariz. (August 7, 2014) — Nuverra Environmental Solutions (NYSE: NES) (“Nuverra” or “the Company”), a leading
provider of full-cycle environmental solutions to the energy and industrial end-markets, today announced financial results for its second quarter and six months ended June 30, 2014.
Summary of Key Second-Quarter Financial Results1
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• |
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Revenue was $126.9 million ($156.6 million including TFI). |
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• |
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Net loss from continuing operations for the quarter was $(24.7) million (net loss of $(23.3) million including TFI). |
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• |
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Adjusted EBITDA was $22.9 million ($25.9 million including TFI). |
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• |
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Net cash capital expenditures were $13.9 million in the second quarter ($15.2 million including TFI). |
1 Results of operations of Thermo Fluids Inc. (“TFI”) are reflected as discontinued operations due to its pending divestiture.
Mark D. Johnsrud, Chief Executive Officer, commented, “During the second quarter, we sharpened our focus on pricing within the Shale Solutions segment in
order to further strengthen our overall platform and reduce low-margin business. We implemented pricing increases in multiple basins during the quarter, which included releasing some business that does not meet our profitability targets. We also
identified opportunities to become more efficient and reduce costs. While these activities as a whole resulted in essentially flat sequential revenue for the second quarter, we achieved a 220 bps sequential improvement in adjusted EBITDA margins at
our Shale Solutions segment, and a 328 bps sequential improvement in adjusted EBITDA margins from continuing operations.”
The Company also continued
to advance its business model and address evolving customer demands, including initiatives for the construction of fixed pipelines and comprehensive solids treatment and reuse solutions. “As shale drilling, completion, and production work
expands and matures, the industry is seeing significant increases in well density, which is heightened by the presence of stacked pay zones in certain basins,” Mr. Johnsrud commented. “This is enhancing customer interest in long-term
solutions for solids management, as well as fixed pipelines to deal with increasing amounts of water, which is a function of both increased production and more water-intensive hydraulic fracturing methods. As an example, during the second quarter
the Company handled an increase of over 20% in liquid disposal volumes quarter over quarter.”
1
Relating to growing its pipeline solutions initiatives, Nuverra recently executed a Memorandum of Understanding
with a major customer to construct a significant fixed pipeline system for produced, flowback, and fresh water backed by a long-term contract. The Company is currently working on finalizing a definitive agreement for the system. Subject to
successful completion of the definitive agreement, project development is currently expected to begin in the late fourth quarter of 2014 or first quarter of 2015 and to be completed in late 2015. Current contemplated capital investments in the
pipeline system are estimated between $125 and $150 million. The Company is also in active discussions with other customers for additional fixed pipeline initiatives in multiple basins.
“We are very excited about the progress we have made in advancing our pipeline initiatives,” Mr. Johnsrud commented. “We believe fixed
pipelines will play a critical role as shale basins mature. Long-term demand from production-related water grows with more wells on production, and advances in fracing techniques are resulting in significant increases in water volumes. Nuverra is at
the forefront of this industry development, given our team’s expertise as well as our experience with our Haynesville pipeline.”
Additionally,
the Company continues to take steps to advance its handling of drilling solids. The construction of additional assets to expand solids treatment and reuse initiatives at Nuverra’s Environmental Treatment Center located at its landfill in the
Bakken Shale area is on track to generate incremental revenue beginning in the fourth quarter of 2014.
The Company also completed its previously
announced acquisition of permitted land in the Eagle Ford, and is moving forward to develop a comprehensive solids treatment, recycling and disposal facility which it expects to be operational in the second half of 2015.
In conjunction with these growth initiatives, the Company is considering a drop-down Master Limited Partnership (“MLP”) strategy. The Company
currently believes that this structure could potentially include assets currently in operation, as well as future assets the Company develops. The Company has engaged a law firm to assist it with this process, including seeking to obtain a Private
Letter Ruling (“PLR”) from the Internal Revenue Service.
The Company reaffirmed its belief that E&P operator activities, particularly on
the completions side, will increase through the balance of the fiscal year. Mr. Johnsrud commented, “We remain optimistic that drilling and completion activities will continue to grow in the back half of the year based on growing well
density and increasing use of hybrid and slickwater fracs, all of which require abundantly more water. We are confident our expanded service offerings, some of which are commencing in 2014, will complement this continued industry growth.”
Second Quarter 2014 Financial Overview
Including
TFI, second quarter revenue was $156.6 million, compared with $165.5 million in the second quarter of 2013, and $155.7 million in the first quarter of 2014.
2
Adjusted EBITDA for the second quarter of 2014 including TFI was $25.9 million, compared with $33.3 million for
the same prior-year period, and $22.0 million in the first quarter of 2014. Excluding TFI, adjusted EBITDA in the second quarter was $22.9 million compared with $28.0 million in the second quarter of 2013, and $18.9 million in the first quarter of
2014.
The Company incurred non-recurring adjustments to EBITDA from continuing operations in the second quarter totaling $13.0 million, primarily due to
expenses related to the settlement of legacy legal matters. These adjustments included $5.5 million in settlement expense and $1.3 million in legal fees for a total of $6.8 million to resolve all claims related to the previously disclosed lawsuit in
Dimmit County, Texas. Also, as part of the previously announced China Water settlement, the Company recorded a non-cash settlement charge of $3.6 million related to the change in the market value of the 847,990 shares issued as part of that
settlement, as well as $1.0 million of final legal expenses and defense costs.
Jay C. Parkinson, Chief Financial Officer, commented, “We are very
pleased to conclude these legacy matters and look forward to executing on this management team’s vision and strategy to create long-term growth and value for the future. We have removed potential obstacles by resolving significant litigation
matters and completing the integration and rebranding of our shale business. We have taken decisive actions to revitalize our operating model and are very excited to clear the path and execute on our new initiatives.”
On June 30, 2014, cash and cash equivalents were $3.3 million excluding TFI ($4.4 million including TFI) and total debt was $580.52 million, including $400.0 million of senior unsecured notes, $163.3 million drawn under the Company’s asset-based revolving credit facility and $17.2 million in capital leases. Net cash capital
expenditures including TFI in the second quarter totaled $15.2 million, primarily related to the ongoing construction of the Company’s new environmental treatment center for solids in the Bakken.
As previously disclosed, during the second quarter the Company amended its Stock Purchase Agreement (“SPA”) relating to the sale of TFI to Verolube
USA, which included a transaction closing deadline of August 29, 2014. The Company has completed and delivered to Verolube USA all required TFI stand alone audits and interim reviews, as required under the revised SPA.
2 Excludes unamortized discount and premium of $0.7 million, net.
Operational Highlights
For the second quarter,
total Shale Solutions revenue was $126.9 million, of which $92.2 million was derived from predominantly liquids-rich areas and $34.6 million was derived from predominantly gas-rich areas.
3
Reviewing basin-level operational detail:
Bakken
In the Bakken Shale area, revenues
declined slightly from the first quarter of 2014, primarily related to utilization declines in the Company’s rental business due to the impact of over-supply in the basin. This was largely offset by continued growth in landfill solids volumes,
as well as increases in liquid disposal volumes, which resulted in overall sequential increases in margins.
Marcellus and Utica
In the Marcellus and Utica Shale areas, revenues increased sequentially as the positive trends exiting the first quarter continued and drilling and completion
activities returned to normalized levels. Mr. Parkinson said “A significant opportunity remains for the management of water containing high levels of total dissolved solids. We opened a new treatment system in April in response to our
customers’ needs, and we are also seeing increased volumes at our existing AWS treatment facility. The Marcellus/Utica is also an area where we have been highly focused on improving our margins, and we recently implemented a price increase with
our largest customer, which will take effect beginning in the third quarter.”
Haynesville / Tuscaloosa Marine Shale
Revenues increased sequentially in the Haynesville Shale, reflecting an uptick in drilling activity in the basin, as well as higher pipeline volumes. “We
continue to be enthusiastic about developments in the Haynesville,” Mr. Parkinson said. “Activity levels have increased, particularly in the Cotton Valley formation, and we saw increasing pipeline volumes during the quarter as a
result. We see a number of Cotton Valley wells that were drilled in the first half of 2014 coming onto production in the second half of the year, which we believe will drive incremental pipeline volumes. During the quarter, we implemented pricing
increases with a number of customers in the basin.”
Activities in the Tuscaloosa Marine Shale region also increased in the second quarter, and the
Company expects to see increasing demand in this region through the balance of the year as operators expand their drilling and completion activities. The Company had previously curtailed activities in the basin in 2013, but due to recent industry
activity increases has re-commenced operations.
Eagle Ford
The Eagle Ford operations delivered continuing improvements in the second quarter, including sequential revenue and adjusted EBITDA growth. The Company is
focused on efficiency and continued growth in the basin, including construction of an environmental treatment center at its recently acquired permitted land.
4
During the second quarter, the Company finalized the shutdown of its operations in the Barnett Shale area, after
concluding that revenue generated in the basin did not meet its margin and return on capital targets, and also reduced activity in certain areas of Oklahoma and Kansas. The Company expects to continue to actively review its operations, pricing
strategy, and efficiency in each basin with the goal of improving operating margins and returns on invested capital.
Business Outlook
Mr. Johnsrud provided commentary on the Company’s strategy and business outlook for the second half of the year:
“Looking ahead, the trends we observed in the second quarter support our expectation for a stronger back half of the year. We anticipate E&P spending
levels related to drilling and completion activities to continue to intensify, which will require that more fluids and solids be managed both on and off the well sites. The anticipated increase in E&P spending combined with an increasingly
demanding environmental regulatory landscape forms the basis for our positive outlook. Additionally we believe the progress we have made in advancing our integrated business model, including new initiatives like the pipeline and Environmental
Treatment Centers for solids, will drive margins, growth, and returns on invested capital.”
Conference Call & Webcast
The Company will host a conference call to discuss its second quarter 2014 financial results at 4:30 p.m. ET (1:30 p.m. PT) today. To participate on the
conference call, please dial +1-800-289-0438 (US) or +1-913-312-1378 (International) and reference conference ID 3553637. An audio replay of the call will be available approximately one hour following the conclusion of the call through
August 21, 2014. The audio replay of the conference call can be accessed by dialing +1-888-203-1112 (US) or +1-719-457-0820 (International) and entering access code 3553637. The call will be webcast live and a replay 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 energy and industrial end-markets. Nuverra focuses on the delivery, collection, treatment, recycling, and disposal of restricted solids, water, wastewater, used motor oil, spent antifreeze, 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. Interested parties can access additional information
about Nuverra on the Company’s web site at http://www.nuverra.com, and in documents filed with the United States Securities and Exchange Commission, on the SEC’s web site at http://www.sec.gov.
5
About Non-GAAP Financial Measures
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 non-recurring charges, 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.
Forward-Looking Statements
This press release may contain “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,”
“could,” “should,” “believes,” “predicts,” “potential,” “continue,” “confident,” and similar expressions are intended to identify such forward-looking statements. Forward-looking
statements in the press release include, without limitation, 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 divestitures, timing of such divestitures, acquisitions, financings, business growth and expansion opportunities, availability of capital, ability to access capital markets, and other matters that involve known and unknown risks,
uncertainties and other factors that may cause results, levels of activity, performance or achievements to
6
differ materially from results expressed or implied by this press release. Such risk factors include, among others: 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, including risks that such
transactions may fail to close due to unsatisfied closing conditions; 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; low oil and or natural gas prices; changes in customer drilling and completion activities and capital expenditure plans; shifts in production among shale areas
in which we operate and/or into shale areas in which we currently do not have operations; control of costs and expenses; and the competitive and regulatory environment. Additional risks and uncertainties are set forth in the Company’s Form 10-Q
for the three months ended June 30, 2014, its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as well as the Company’s other reports filed with the United States Securities and Exchange Commission, which are
available at http://www.sec.gov and the Company’s web site at http://www.nuverra.com. As a result of the foregoing considerations and the other limitations of non-GAAP measures described elsewhere herein, you are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of this presentation. All forward-looking statements are qualified in their entirety by this cautionary statement. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Source: Nuverra Environmental Solutions
Nuverra Environmental Solutions, Inc.
Liz Merritt,
602-903-7802
VP-Investor Relations & Communications
ir@nuverra.com
- or -
The Piacente Group, Inc.
Don Markley or Glenn Garmont,
212-481-2050
nuverra@tpg-ir.com
7
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
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| Revenue: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Non-rental revenue |
|
$ |
107,299 |
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|
$ |
114,495 |
|
|
$ |
217,143 |
|
|
$ |
223,819 |
|
| Rental revenue |
|
|
19,563 |
|
|
|
20,482 |
|
|
|
37,733 |
|
|
|
41,805 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Total revenue |
|
|
126,862 |
|
|
|
134,977 |
|
|
|
254,876 |
|
|
|
265,624 |
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| Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Direct operating expenses |
|
|
92,757 |
|
|
|
95,644 |
|
|
|
186,383 |
|
|
|
187,656 |
|
| General and administrative expenses |
|
|
24,655 |
|
|
|
15,403 |
|
|
|
43,203 |
|
|
|
29,482 |
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| Depreciation and amortization |
|
|
21,370 |
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|
|
28,003 |
|
|
|
42,281 |
|
|
|
56,054 |
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| Restructuring, impairment and exit costs |
|
|
— |
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|
|
4,952 |
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|
|
— |
|
|
|
4,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
138,782 |
|
|
|
144,002 |
|
|
|
271,867 |
|
|
|
278,144 |
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|
|
|
|
|
|
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|
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|
|
|
|
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| Loss from operations |
|
|
(11,920 |
) |
|
|
(9,025 |
) |
|
|
(16,991 |
) |
|
|
(12,520 |
) |
| Interest expense, net |
|
|
(12,969 |
) |
|
|
(13,256 |
) |
|
|
(25,019 |
) |
|
|
(26,671 |
) |
| Other income (expense), net |
|
|
472 |
|
|
|
(208 |
) |
|
|
52 |
|
|
|
(1,239 |
) |
| Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
(3,177 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Loss from continuing operations before income taxes |
|
|
(24,417 |
) |
|
|
(22,489 |
) |
|
|
(45,135 |
) |
|
|
(40,430 |
) |
| Income tax (expense) benefit |
|
|
(305 |
) |
|
|
824 |
|
|
|
8,499 |
|
|
|
14,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from continuing operations |
|
|
(24,722 |
) |
|
|
(21,665 |
) |
|
|
(36,636 |
) |
|
|
(25,670 |
) |
| Income from discontinued operations, net of income taxes |
|
|
1,453 |
|
|
|
8,816 |
|
|
|
1,912 |
|
|
|
189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss attributable to common stockholders |
|
$ |
(23,269 |
) |
|
$ |
(12,849 |
) |
|
$ |
(34,724 |
) |
|
$ |
(25,481 |
) |
|
|
|
|
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| Net loss per common share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Basic and diluted loss from continuing operations |
|
$ |
(0.97 |
) |
|
$ |
(0.89 |
) |
|
$ |
(1.45 |
) |
|
$ |
(1.07 |
) |
| Basic and diluted income from discontinued operations |
|
|
0.06 |
|
|
|
0.36 |
|
|
|
0.08 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per basic and diluted share |
|
$ |
(0.91 |
) |
|
$ |
(0.53 |
) |
|
$ |
(1.37 |
) |
|
$ |
(1.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding used in computing net loss per basic and diluted common share |
|
|
25,524 |
|
|
|
24,241 |
|
|
|
25,273 |
|
|
|
24,042 |
|
8
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
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|
|
|
|
| |
|
June 30, |
|
|
December 31, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
(Unaudited) |
|
|
(Note 1) |
|
| Assets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
3,347 |
|
|
$ |
8,783 |
|
| Restricted cash |
|
|
112 |
|
|
|
110 |
|
| Accounts receivable, net |
|
|
96,929 |
|
|
|
87,086 |
|
| Inventories |
|
|
3,662 |
|
|
|
3,328 |
|
| Prepaid expenses and other receivables |
|
|
4,433 |
|
|
|
10,457 |
|
| Deferred income taxes |
|
|
22,123 |
|
|
|
30,072 |
|
| Other current assets |
|
|
125 |
|
|
|
409 |
|
| Current assets held for sale |
|
|
25,458 |
|
|
|
21,446 |
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
156,189 |
|
|
|
161,691 |
|
|
|
|
|
|
|
|
|
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| Property, plant and equipment, net |
|
|
483,020 |
|
|
|
498,541 |
|
| Equity investments |
|
|
4,032 |
|
|
|
4,032 |
|
| Intangibles, net |
|
|
140,663 |
|
|
|
149,363 |
|
| Goodwill |
|
|
408,696 |
|
|
|
408,696 |
|
| Other assets |
|
|
19,719 |
|
|
|
21,136 |
|
| Long-term assets held for sale |
|
|
169,230 |
|
|
|
167,304 |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
1,381,549 |
|
|
$ |
1,410,763 |
|
|
|
|
|
|
|
|
|
|
| Liabilities and Equity |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
23,252 |
|
|
$ |
33,229 |
|
| Accrued expenses |
|
|
66,385 |
|
|
|
63,431 |
|
| Current portion of contingent consideration |
|
|
9,924 |
|
|
|
13,113 |
|
| Current portion of long-term debt |
|
|
6,326 |
|
|
|
5,464 |
|
| Financing obligation to acquire non-controlling interest |
|
|
10,394 |
|
|
|
— |
|
| Current liabilities of discontinued operations |
|
|
9,683 |
|
|
|
9,301 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
125,964 |
|
|
|
124,538 |
|
|
|
|
|
|
|
|
|
|
| Deferred income taxes |
|
|
28,069 |
|
|
|
42,982 |
|
| Long-term portion of debt |
|
|
573,503 |
|
|
|
549,713 |
|
| Long-term portion of contingent consideration |
|
|
1,461 |
|
|
|
2,344 |
|
| Other long-term liabilities |
|
|
3,984 |
|
|
|
4,324 |
|
| Financing obligation to acquire non-controlling interest |
|
|
— |
|
|
|
10,104 |
|
| Long-term liabilities of discontinued operations |
|
|
31,719 |
|
|
|
32,389 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
764,700 |
|
|
|
766,394 |
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
| Common stock |
|
|
28 |
|
|
|
27 |
|
| Additional paid-in capital |
|
|
1,348,412 |
|
|
|
1,341,209 |
|
| Treasury stock |
|
|
(19,503 |
) |
|
|
(19,503 |
) |
| Accumulated deficit |
|
|
(712,088 |
) |
|
|
(677,364 |
) |
|
|
|
|
|
|
|
|
|
| Total equity of Nuverra Environmental Solutions, Inc. |
|
|
616,849 |
|
|
|
644,369 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and equity |
|
$ |
1,381,549 |
|
|
$ |
1,410,763 |
|
|
|
|
|
|
|
|
|
|
Note 1: The condensed consolidated balance sheet at December 31, 2013 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, 2013.
9
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended June 30, |
|
| |
|
2014 |
|
|
2013 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(34,724 |
) |
|
$ |
(25,481 |
) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
| Income from discontinued operations, net of income taxes |
|
|
(1,912 |
) |
|
|
(189 |
) |
| Depreciation |
|
|
33,581 |
|
|
|
43,721 |
|
| Amortization of intangible assets |
|
|
8,700 |
|
|
|
12,333 |
|
| Amortization of deferred financing costs |
|
|
1,646 |
|
|
|
2,411 |
|
| Amortization of original issue discounts and premiums, net |
|
|
72 |
|
|
|
72 |
|
| Stock-based compensation |
|
|
1,408 |
|
|
|
2,123 |
|
| Impairment of property, plant and equipment |
|
|
— |
|
|
|
3,499 |
|
| (Gain) loss on disposal of property, plant and equipment |
|
|
(2,248 |
) |
|
|
95 |
|
| Bad debt expense |
|
|
1,014 |
|
|
|
915 |
|
| Loss on extinguishment of debt |
|
|
3,177 |
|
|
|
— |
|
| Deferred income taxes |
|
|
(6,965 |
) |
|
|
(14,955 |
) |
| Other, net |
|
|
1,147 |
|
|
|
816 |
|
| Changes in operating assets and liabilities, net of business acquisitions and purchase price adjustments: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(10,857 |
) |
|
|
6,956 |
|
| Prepaid expenses and other receivables |
|
|
6,024 |
|
|
|
(1,317 |
) |
| Accounts payable and accrued expenses |
|
|
(3,429 |
) |
|
|
2,781 |
|
| Other assets and liabilities, net |
|
|
(515 |
) |
|
|
566 |
|
|
|
|
|
|
|
|
|
|
| Net cash (used in) provided by operating activities from continuing operations |
|
|
(3,881 |
) |
|
|
34,346 |
|
| Net cash provided by operating activities from discontinued operations |
|
|
2,880 |
|
|
|
2,130 |
|
|
|
|
|
|
|
|
|
|
| Net cash (used in) provided by operating activities |
|
|
(1,001 |
) |
|
|
36,476 |
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Cash paid for acquisitions, net of cash acquired |
|
|
— |
|
|
|
(738 |
) |
| Proceeds from the sale of property, plant and equipment |
|
|
3,810 |
|
|
|
477 |
|
| Purchases of property, plant and equipment |
|
|
(23,943 |
) |
|
|
(21,400 |
) |
| Proceeds from acquisition-related working capital adjustment |
|
|
— |
|
|
|
2,067 |
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities from continuing operations |
|
|
(20,133 |
) |
|
|
(19,594 |
) |
| Net cash used in investing activities from discontinued operations |
|
|
(2,262 |
) |
|
|
(1,600 |
) |
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(22,395 |
) |
|
|
(21,194 |
) |
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from revolving credit facility |
|
|
50,725 |
|
|
|
17,000 |
|
| Payments on revolving credit facility |
|
|
(27,700 |
) |
|
|
(34,500 |
) |
| Payments for deferred financing costs |
|
|
(734 |
) |
|
|
(229 |
) |
| Payments on notes payable and capital leases |
|
|
(2,700 |
) |
|
|
(2,596 |
) |
| Other financing activities |
|
|
(1,013 |
) |
|
|
(529 |
) |
|
|
|
|
|
|
|
|
|
| Net cash provided by (used in) financing activities of continuing operations |
|
|
18,578 |
|
|
|
(20,854 |
) |
| Net cash used in financing activities of discontinued operations |
|
|
— |
|
|
|
(400 |
) |
|
|
|
|
|
|
|
|
|
| Net cash provided by (used in) financing activities |
|
|
18,578 |
|
|
|
(21,254 |
) |
|
|
|
|
|
|
|
|
|
| Net decrease in cash and cash equivalents |
|
|
(4,818 |
) |
|
|
(5,972 |
) |
| Cash and cash equivalents – beginning of period |
|
|
9,212 |
|
|
|
16,211 |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents – end of period |
|
|
4,394 |
|
|
|
10,239 |
|
| Less: cash and cash equivalents of discontinued operations – end of period |
|
|
1,047 |
|
|
|
1,565 |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents of continuing operations – end of period |
|
$ |
3,347 |
|
|
$ |
8,674 |
|
|
|
|
|
|
|
|
|
|
10
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED EBITDA GAAP RECONCILIATION
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Loss from continuing operations |
|
$ |
(24,722 |
) |
|
$ |
(21,665 |
) |
|
$ |
(36,636 |
) |
|
$ |
(25,670 |
) |
| Depreciation of property, plant and equipment |
|
|
16,974 |
|
|
|
21,664 |
|
|
|
33,581 |
|
|
|
43,721 |
|
| Amortization of intangible assets |
|
|
4,396 |
|
|
|
6,339 |
|
|
|
8,700 |
|
|
|
12,333 |
|
| Interest expense, net |
|
|
12,969 |
|
|
|
13,256 |
|
|
|
25,019 |
|
|
|
26,671 |
|
| Income tax expense (benefit) |
|
|
305 |
|
|
|
(824 |
) |
|
|
(8,499 |
) |
|
|
(14,760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EBITDA |
|
|
9,922 |
|
|
|
18,770 |
|
|
|
22,165 |
|
|
|
42,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Transaction-related costs, including earnout adjustments, net |
|
|
— |
|
|
|
532 |
|
|
|
513 |
|
|
|
1,524 |
|
| Stock-based compensation |
|
|
1,115 |
|
|
|
1,333 |
|
|
|
1,408 |
|
|
|
2,123 |
|
| Texas court case settlement |
|
|
5,500 |
|
|
|
— |
|
|
|
5,500 |
|
|
|
— |
|
| Shareholder litigation settlement |
|
|
3,581 |
|
|
|
— |
|
|
|
3,581 |
|
|
|
— |
|
| Legal and environmental costs, net |
|
|
3,701 |
|
|
|
73 |
|
|
|
5,557 |
|
|
|
2,470 |
|
| Restructuring, impairment, exit and other costs |
|
|
63 |
|
|
|
4,952 |
|
|
|
63 |
|
|
|
4,952 |
|
| Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
3,177 |
|
|
|
— |
|
| Integration, severance and rebranding costs |
|
|
— |
|
|
|
2,324 |
|
|
|
2,072 |
|
|
|
3,002 |
|
| Gain on disposal of assets |
|
|
(993 |
) |
|
|
— |
|
|
|
(2,248 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA from continuing operations |
|
|
22,889 |
|
|
|
27,984 |
|
|
|
41,788 |
|
|
|
56,366 |
|
| Adjusted EBITDA from discontinued operations |
|
|
3,016 |
|
|
|
5,280 |
|
|
|
6,114 |
|
|
|
8,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Adjusted EBITDA |
|
$ |
25,905 |
|
|
$ |
33,264 |
|
|
$ |
47,902 |
|
|
$ |
65,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of income from discontinued operations to EBITDA and Adjusted EBITDA from discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Income from discontinued operations |
|
$ |
1,453 |
|
|
$ |
8,816 |
|
|
$ |
1,912 |
|
|
$ |
189 |
|
| Depreciation of property, plant and equipment |
|
|
— |
|
|
|
675 |
|
|
|
— |
|
|
|
1,340 |
|
| Amortization of intangible assets |
|
|
— |
|
|
|
2,593 |
|
|
|
— |
|
|
|
5,324 |
|
| Interest expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Income tax (benefit) expense |
|
|
(31 |
) |
|
|
(7,514 |
) |
|
|
1,665 |
|
|
|
757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EBITDA from discontinued operations |
|
|
1,422 |
|
|
|
4,570 |
|
|
|
3,577 |
|
|
|
7,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Transaction-related costs |
|
|
907 |
|
|
|
— |
|
|
|
1,931 |
|
|
|
— |
|
| Legal and environmental costs |
|
|
733 |
|
|
|
710 |
|
|
|
733 |
|
|
|
1,374 |
|
| Gain on disposal of assets |
|
|
(46 |
) |
|
|
— |
|
|
|
(127 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA from discontinued operations |
|
$ |
3,016 |
|
|
$ |
5,280 |
|
|
$ |
6,114 |
|
|
$ |
8,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CAPITAL EXPENDITURES RECONCILIATION
(In thousands)
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2014 |
|
|
2014 |
|
| Net cash capital expenditures from continuing operations |
|
$ |
13,941 |
|
|
$ |
20,133 |
|
| Net cash capital expenditures from discontinued operations |
|
|
1,212 |
|
|
|
2,262 |
|
|
|
|
|
|
|
|
|
|
| Total net cash capital expenditures |
|
$ |
15,153 |
|
|
$ |
22,395 |
|
|
|
|
|
|
|
|
|
|
12