Nuverra Reports First-Quarter 2015 Results

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%

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

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 share

$    (0.41)

$    (0.46)

Weighted average shares outstanding used in computing net loss per basic and diluted common share

27,412

25,020

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.

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 of continuing operations

(8,436)

7,978

Net cash provided by financing activities of 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

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

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%

Three Months Ended March 31, 2014

Rocky Mountain

Northeast

Southern

Corporate

Total

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 income (loss)

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%

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 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  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.

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)