Nuverra Announces Fourth-Quarter, Full-Year 2015 Results
PR Newswire
SCOTTSDALE, Ariz.

SCOTTSDALE, Ariz., March 11, 2016 /PRNewswire/ -- Nuverra Environmental Solutions, Inc. (OTCQB: NESC) ("Nuverra" or the "Company") today announced financial and operating results for the fourth quarter and full year ended December 31, 2015.

Summary of Financial Results

  • Fourth-quarter revenue from continuing operations was $68.6 million, a decrease of approximately 10% sequentially from the third quarter and approximately 52% compared with $141.8 million in the fourth quarter of 2014. Revenue for 2015 was $356.7 million, down approximately 34% when compared with $536.3 million in 2014.
  • Loss from continuing operations for the fourth quarter was $34.4 million, or a loss of $1.24 per diluted share. Excluding special items, loss from continuing operations for the fourth quarter was $21.8 million, or a loss of $0.79 per diluted share. Full-year loss from continuing operations was $195.2 million, or a loss of $7.05 per diluted share. Excluding special items, loss from continuing operations for the year was $73.8 million, or a loss of $2.67 per diluted share.
  • Adjusted EBITDA from continuing operations for the fourth quarter was $8.2 million, up approximately 31% sequentially from the third quarter, and down approximately 68% when compared to adjusted EBITDA from continuing operations of $25.4 million in the fourth quarter of 2014. Fourth-quarter adjusted EBITDA margin was 12.0%, compared sequentially with 8.2% in the third quarter and 17.9% in the fourth quarter of 2014. Full-year 2015 adjusted EBITDA from continuing operations was $45.9 million with a margin of 12.9%, compared with $95.2 million and a margin of 17.8% in 2014.
  • The Company generated $43.4 million in free cash flow in 2015; $39.3 million cash on hand at December 31, 2015.
  • Company separately announced today it has entered into a Restructuring Support Agreement with majority holders of its Senior Notes Due 2018 to improve liquidity and defer cash interest expense.

Mark. D. Johnsrud, Chairman of the Board and Chief Executive Officer, commented, "The fourth quarter remained challenging, with further reductions in activity levels, pricing headwinds and an extended holiday slowdown in overall customer activities. Looking ahead, we expect the operating environment will remain difficult. Customers are significantly reducing capital spending from 2015 levels and are intent on controlling costs through efficient well designs and technology programs. We remain focused on cost management, operational efficiency and free cash flow, while also being responsive to changes in market conditions."

In a separate press release issued today, the Company announced it has entered into a Restructuring Support Agreement with majority holders of its Senior Notes Due 2018 to restructure the Company's debt. That press release can be found at www.nuverra.com.

Mr. Johnsrud commented, "With the continued support of our bank group and noteholders, we are working together to create a solution for the Company's financing needs, that if successfully completed, will improve liquidity, defer cash interest expense and preserve potential value for our shareholders." 

FOURTH-QUARTER 2015 RESULTS

Fourth-quarter 2015 revenue from continuing operations was $68.6 million, a sequential decrease of $7.9 million, or 10%, when compared with $76.5 million in the third quarter, and a decrease of $73.1 million, or 52%, when compared with revenue from continuing operations of $141.8 million in the fourth quarter of 2014.  The decreases were primarily related to further reductions in overall customer drilling and completion activities and pricing pressures, as well as the impact of an extended holiday slowdown in November and December. These factors impacted all operating divisions, driving lower revenue for fluid and solid logistics services, disposal and rental services, offset slightly by an increase in revenue related to Haynesville water midstream services, when compared with the fourth quarter of 2014.

The Company realized significant reductions in total costs and expenses throughout 2015, driven by two primary factors:  the overall decline in market activities driving down variable costs and actions taken by the Company to proactively reduce costs and expenses.  Fourth-quarter total costs and expenses, adjusted for special items, were $78.5 million, a 43% decrease compared with the fourth quarter of 2014. Reductions included approximately $23.8 million in lower variable payroll and related expenses, approximately $8.8 million in fuel reductions, and approximately $4.0 million in lower depreciation and amortization expense, with the balance due to reductions in all other direct operating costs. For the full year, total costs and expenses adjusted for special items were $381.9 million, a reduction of $145.9 million, or nearly 28%, compared with 2014.

Excluding special items, fourth-quarter loss from continuing operations was $21.8 million, or a loss of $0.79 per diluted share, compared with loss from continuing operations of $9.6 million, or a loss of $0.35 per diluted share in the fourth quarter of 2014. Reported fourth-quarter loss from continuing operations was $34.4 million, or a loss of $1.24 per share, compared with a loss from continuing operations of $321.1 million, or a loss of $11.84 per share in the fourth quarter of 2014. Special items for the fourth quarter primarily consisted of approximately $9.9 million in restructuring and other exit-related costs and approximately $1.1 million related to the write off of a portion of unamortized deferred financing costs associated with the Company's amended asset-based revolving credit facility. Special items affecting 2014 fourth-quarter results primarily consisted of non-cash impairment charges of $203.3 million for goodwill and $112.4 million for long-lived assets.

Adjusted EBITDA from continuing operations for the fourth quarter was $8.2 million, an increase of $2.0 million, or 31%, sequentially from $6.2 million in the third-quarter. Fourth-quarter adjusted EBITDA margin was 12.0%, compared with a margin of 8.2% in the third quarter. The improvement was primarily due to decreased insurance and compensation costs, and lower bad debt expense. On a year-over-year comparison, adjusted EBITDA from continuing operations was down 68% compared with the fourth quarter of 2014.

2015 FULL-YEAR RESULTS

Revenue for the full year was $356.7 million, or a decline of 34%, when compared with $536.3 million in 2014. The decrease was largely driven by the continuous slowing throughout the year in customer drilling and completion activities in all operating basins, coupled with service pricing pressures and the extended holiday slowdown that impacted the fourth quarter.

Excluding special items, 2015 loss from continuing operations was $73.8 million, or a loss of $2.67 per diluted share, compared with a loss from continuing operations of $40.7 million, or a loss of $1.56 per diluted share, for the same period in 2014. Reported loss from continuing operations for the year was $195.2 million, or a loss of $7.05 per diluted share, compared with a loss of $457.2 million, or a loss of $17.52 per diluted share in 2014.  Special items for the full year primarily consisted of non-cash charges of $104.7 million for goodwill impairment, approximately $11.1 million in restructuring and other exit-related costs, and approximately $2.1 million related to the write off of a portion of unamortized deferred financing costs associated with the amended asset-based revolving credit facility. Special items in 2014 primarily consisted of non-cash impairment charges of $304.0 million for goodwill and $112.4 million for long-lived assets.

2015 adjusted EBITDA from continuing operations was $45.9 million, with a margin of 12.9%, compared with $95.2 million, with a margin of 17.8%, in 2014. The year-over-year decline was related primarily to the effects of significantly lower customer drilling and completion activities coupled with continuous service pricing pressures, which drove lower revenue, offset in part by reductions in total costs and expenses.

CASH & LIQUIDITY

Net cash provided by operating activities from continuing operations through December 31, 2015 was $49.8 million, with net cash capital expenditures from continuing operations of $6.5 million for the year. The Company generated $43.4 million in free cash flow for the year, compared with a use of cash of $28.2 million in 2014.

At December 31, 2015, total debt outstanding, excluding $0.4 million in premiums and discounts, was $520.2 million, consisting of $400 million of 2018 Notes, $101.8 million outstanding under the asset-backed revolving credit facility, and $18.8 million in capital leases and notes payable.

The Company made principal payments on the revolving credit facility totaling $20.0 million during January and February 2016, following the periodic appraisal of the borrowing base, resulting in $81.8 million principal outstanding as of February 29, 2016. The Company had $20.7 million cash on hand and $0.7 million of net availability remaining under the facility as of February 29, 2016.

The Company further disclosed that its audited consolidated financial statements for the fiscal year ended December 31, 2015 included in the Company's Annual Report on Form 10-K, which was filed today with the Securities and Exchange Commission, contained an explanatory paragraph regarding its ability to continue as a going concern from its independent registered public accounting firm. On March 10, 2016, lenders under the revolving credit facility amended certain terms of the facility and consented to the inclusion of a going concern qualification or exception in the Company's 2015 audited financials. The Company remains current with all payment obligations due on its outstanding debt.

DIVISION RESULTS OVERVIEW

Three Months Ended December 31, 2015


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$              37,685


$   17,586


$  13,361


$          -


$   68,632

Operating loss


(4,634)


(2,400)


(9,499)


(4,916)


(21,449)

Operating Margin %


(12.3%)


(13.6%)


(71.1%)


NA


(31.3%)

Adjusted EBITDA


8,520


2,484


1,282


(4,077)


8,209

Adjusted EBITDA Margin %


22.6%


14.1%


9.6%


NA


12.0%























Three Months Ended December 31, 2014


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$              87,789


$   28,159


$  25,815


$          -


$ 141,763

Operating loss


(302,678)


(1,219)


(3,166)


(2,803)


(309,866)

Operating Margin %


(344.8%)


(4.3%)


(12.3%)


NA


(218.6%)

Adjusted EBITDA


25,781


2,859


1,526


(4,773)


25,393

Adjusted EBITDA Margin %


29.4%


10.2%


5.9%


NA


17.9%























Year Ended December 31, 2015


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$             196,021


$   92,135


$  68,543


$          -


$ 356,699

Operating loss


(97,781)


(3,624)


(19,422)


(24,012)


(144,839)

Operating Margin %


(49.9%)


(3.9%)


(28.3%)


NA


(40.6%)

Adjusted EBITDA


46,080


13,536


6,265


(19,957)


45,924

Adjusted EBITDA Margin %


23.5%


14.7%


9.1%


NA


12.9%























Year Ended December 31, 2014


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$             334,770


$   95,577


$ 105,935


$          -


$ 536,282

Operating loss


(269,813)


(42,447)


(80,491)


(24,903)


(417,654)

Operating Margin %


(80.6%)


(44.4%)


(76.0%)


NA


(77.9%)

Adjusted EBITDA


97,948


10,436


7,726


(20,895)


95,215

Adjusted EBITDA Margin %


29.3%


10.9%


7.3%


NA


17.8%

 

Rocky Mountain Division (Bakken)

Rocky Mountain Division revenue for the fourth quarter was $37.7 million, a decrease of 8.8% compared sequentially with third-quarter revenue of $41.3 million, and a decrease of 57.1% on a year-over-year comparison with revenue of $87.8 million the fourth quarter of 2014.  For the full year, Rocky Mountain Division revenue was $196.0 million, a decrease of 41.4%, compared with revenue of $334.8 million in 2014. Quarterly and year-over-year declines were related primarily to significant reductions in customer drilling and completion activities and the effect of continued pricing pressures, in addition to the impact of an extended holiday slowdown in November and December.

Fourth-quarter adjusted EBITDA from continuing operations for the Rocky Mountain Division was $8.5 million, with an adjusted EBITDA margin of 22.6%, compared with $25.8 million and a 29.4% adjusted EBITDA margin in the fourth quarter of 2014. On a sequential comparison, fourth-quarter adjusted EBITDA from continuing operations was up $78,000 when compared with third-quarter adjusted EBITDA from continuing operations of $8.4 million, with an adjusted EBITDA margin of 20.4%. The improvement was driven by overall cost and expense reductions coupled with proactive cost-management activities. For the full year, adjusted EBITDA from continuing operations for the Rocky Mountain division was $46.1 million, with an adjusted EBITDA margin of 23.5%, compared with adjusted EBITDA from continuing operations of $97.9 million, with an adjusted EBITDA margin of 29.3%, in 2014.

Northeast Division (Marcellus, Utica)

Northeast Division revenue for the fourth quarter was $17.6 million, a decrease of 11.3%, compared sequentially with third-quarter revenue of $19.8 million, and a decrease of 37.5% on a year-over-year comparison with revenue of $28.2 million in the fourth quarter of 2014.  For the full year, Northeast Division revenue was $92.1 million, a decrease of 3.6%, compared with revenue of $95.6 million in 2014. The quarterly decline was primarily driven by further reductions in customer drilling and completion activities and continued pricing pressure, as well as the extended holiday slowdown. For the full year, first-half revenue increases from the addition of new customers in the Northeast Division were offset by a slowing of customer drilling and completion activities in the second half of the year.

Fourth-quarter adjusted EBITDA from continuing operations for the Northeast Division was $2.5 million, with an adjusted EBITDA margin of 14.1%, compared with $2.9 million and a 10.2% adjusted EBITDA margin in the fourth quarter of 2014. Despite the overall decline in annual revenue, the Northeast Division achieved a $3.1 million increase in year-over-year adjusted EBITDA from continuing operations, primarily as a result of higher revenue in the first half of the year coupled with lower total costs and expenses for the full year. Adjusted EBITDA from continuing operations for 2015 in this division was $13.5 million, with an adjusted EBITDA margin of 14.7%, compared with adjusted EBITDA from continuing operations of $10.4 million, and an adjusted EBITDA margin of 10.9% in 2014.

Southern Division (Haynesville, Eagle Ford, Permian)

Southern Division revenue for the fourth quarter was $13.4 million, a decrease of 13.1%, compared sequentially with third-quarter revenue of $15.4 million, and a decrease of 48.2% on a year-over-year comparison with revenue of $25.8 million in the fourth quarter of 2014.  For the full year, Southern Division revenue was $68.5 million, a decrease of 35.3%, compared with revenue of $105.9 million in 2014. Quarterly and yearly declines were primarily driven by further reductions in customer drilling and completion activities that impacted water logistics, disposal, and rental equipment services; ongoing pricing pressure; and the extended holiday slowdown in the fourth quarter. These decreases were offset in part by increases in revenue from the Haynesville pipeline compared with the fourth quarter and full-year 2014.

Fourth-quarter adjusted EBITDA from continuing operations for the Southern Division was $1.3 million, with an adjusted EBITDA margin of 9.6%, compared with adjusted EBITDA from continuing operations of $1.5 million and a 5.9% adjusted EBITDA margin in the fourth quarter of 2014. For the full year, adjusted EBITDA from continuing operations for the Southern Division was $6.3 million, with an adjusted EBITDA margin of 9.1%, compared with adjusted EBITDA from continuing operations of $7.7 million and an adjusted EBITDA margin of 7.3% in 2014. The year-over-year adjusted EBITDA margin improvement of 180 basis points was driven by overall cost and expense reductions coupled with proactive cost-management activities.

About Nuverra

Nuverra Environmental Solutions, Inc. is among the largest companies in the United States dedicated to providing comprehensive, full-cycle environmental solutions to customers in the energy market. Nuverra focuses on the delivery, collection, treatment, recycling, and disposal of restricted solids, water, wastewater, waste fluids and hydrocarbons that are part of the drilling, completion and ongoing production of shale oil and natural gas. The Company provides its suite of environmentally compliant and sustainable solutions to customers who demand stricter environmental compliance and accountability from their service providers. Find additional information about Nuverra 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

The 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, pricing, adjusted EBITDA, pipeline and solids treatment initiatives, and landfill and treatment facility activities, as well as statements regarding possible acquisitions, divestitures, financings, restructurings, business growth and expansion opportunities, liquidity, availability of capital, ability to access capital markets, cost-management 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 restructuring our debt; uncertainties in evaluating 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, including uncertainty regarding the ability to successfully implement cost-management initiatives; liquidity and access to capital; compliance with the terms of agreements governing our indebtedness; 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, 2015, as well as Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Liz Merritt, VP-Investor Relations & Communications
480-878-7452
ir@nuverra.com

-- Tables to Follow –

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands, except per share amounts)


















Three Months Ended


Year Ended





December 31,


December 31,





2015


2014


2015


2014





(Unaudited)






Revenue:











Non-rental revenue



$  64,115


$  123,801


$  327,655


$  463,418


Rental revenue



4,517


17,962


29,044


72,864


  Total revenue



68,632


141,763


356,699


536,282


Costs and expenses:











Direct operating expenses



57,826


103,333


279,881


392,458


General and administrative expenses



8,225


10,587


39,327


59,187


Depreciation and amortization



18,046


22,014


70,511


85,880


Impairment of long-lived assets



-


112,436


-


112,436


Impairment of goodwill



-


203,259


104,721


303,975


Other, net



5,984


-


7,098


-


  Total costs and expenses



90,081


451,629


501,538


953,936


Operating loss



(21,449)


(309,866)


(144,839)


(417,654)


Interest expense, net



(12,057)


(12,942)


(49,194)


(50,917)


Other income, net



151


1,734


894


2,107


Loss on extinguishment of debt



(1,134)


-


(2,145)


(3,177)


  Loss from continuing operations before income taxes



(34,489)


(321,074)


(195,284)


(469,641)


Income tax benefit (expense)



77


(50)


117


12,463


  Loss from continuing operations



(34,412)


(321,124)


(195,167)


(457,178)


Income (loss) from discontinued operations, net of income taxes



531


(14,770)


(287)


(58,426)


  Net loss attributable to common stockholders



$(33,881)


$(335,894)


$(195,454)


$(515,604)













Net loss per common share attributable to common stockholders:






















Basic and diluted loss from continuing operations



$    (1.24)


$    (11.84)


$     (7.05)


$    (17.52)


Basic and diluted income (loss) from discontinued operations



0.02


(0.54)


(0.01)


(2.24)


Net loss per basic and diluted share



$    (1.22)


$    (12.38)


$     (7.06)


$    (19.76)













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



27,821


27,122


27,681


26,090

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS

 (In thousands)






December 31,


December 31,



2015


2014


Assets





Cash and cash equivalents

$          39,309


$          13,367


Restricted cash

4,250


114


Accounts receivable, net 

42,188


108,813


Inventories

2,985


4,413


Prepaid expenses and other receivables

3,377


4,147


Deferred income taxes

-


3,179


Other current assets

208


173


Current assets held for sale

-


20,466


Total current assets

92,317


154,672


Property, plant and equipment, net 

406,188


475,982


Equity investments

3,750


3,814


Intangibles, net

16,867


19,757


Goodwill

-


104,721


Other assets

12,205


17,688


Long-term assets held for sale

-


94,938


Total assets

$        531,327


$        871,572


Liabilities and Equity





Accounts payable

$            6,907


$          18,859


Accrued liabilities

29,843


43,395


Current portion of contingent consideration

8,628


9,274


Current portion of long-term debt

508,417


4,863


Financing obligation to acquire non-controlling interest

-


11,000


Current liabilities of discontinued operations

-


8,802


Total current liabilities

553,795


96,193


Deferred income taxes

270


3,448


Long-term portion of debt

11,758


592,455


Long-term portion of contingent consideration

-


550


Other long-term liabilities

3,775


3,874


Long-term liabilities of discontinued operations

-


22,105


Total liabilities

569,598


718,625


Commitments and contingencies





Preferred stock

-


-


Common stock

30


29


Additional paid-in capital

1,369,921


1,365,537


Treasury stock

(19,800)


(19,651)


Accumulated deficit

(1,388,422)


(1,192,968)


Total equity of Nuverra Environmental Solutions, Inc.

(38,271)


152,947


Total liabilities and equity

$        531,327


$        871,572

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands)







Year Ended December 31,



2015


2014

Cash flows from operating activities:





Net loss


$(195,454)


$(515,604)

Adjustments to reconcile net loss to net cash provided by operating activities:





(Income) loss from discontinued operations, net of income taxes


(906)


58,426

Loss on the sale of TFI


1,534


-

Depreciation and amortization of intangible assets


70,511


85,880

Amortization of deferred financing costs and debt discounts, net


4,800


4,188

Stock-based compensation


2,321


2,971

Gain on disposal of property, plant and equipment 


(321)


(4,773)

Impairment of long-lived assets


5,921


112,436

Impairment of goodwill


104,721


303,975

Bad debt expense


(1,110)


3,833

Loss on extinguishment of debt


2,145


3,177

Deferred income taxes


(1)


(12,641)

Other, net


(456)


176

Changes in operating assets and liabilities:





Accounts receivable


67,735


(25,560)

Prepaid expenses and other receivables


543


6,310

Accounts payable and accrued liabilities


(17,059)


(4,213)

Other assets and liabilities, net


4,903


(1,205)

Net cash provided by operating activities from continuing operations


49,827


17,376

Net cash (used in) provided by operating activities from discontinued operations


(708)


3,966

Net cash provided by operating activities


49,119


21,342

Cash flows from investing activities:





  Proceeds from the sale of TFI


78,897


-

  Proceeds from the sale of property, plant and equipment


12,732


10,192

  Purchases of property, plant and equipment


(19,201)


(55,731)

  Change in restricted cash


(4,250)


-

Net cash provided by (used in) investing activities from continuing operations


68,178


(45,539)

Net cash used in investing activities from discontinued operations


(181)


(2,451)

Net cash provided by (used in) investing activities


67,997


(47,990)

Cash flows from financing activities:





  Proceeds from revolving credit facility 


-


107,725

  Payments on revolving credit facility


(81,647)


(67,500)

  Payments for deferred financing costs


(225)


(1,030)

  Payments on vehicle financing and other financing activities


(11,246)


(6,448)

Net cash (used in) provided by financing activities of continuing operations


(93,118)


32,747

Net cash (used in) provided by financing activities of discontinued operations


(105)


105

Net cash (used in) provided by financing activities


(93,223)


32,852

Net increase in cash and cash equivalents


23,893


6,204

Cash and cash equivalents - beginning of period


15,416


9,212

Cash and cash equivalents - end of period


39,309


15,416

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


-


2,049

Cash and cash equivalents of continuing operations - end of period


$    39,309


$    13,367

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

NON-GAAP RECONCILIATIONS

 (In thousands)

(Unaudited)


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










Reconciliation of Loss from Continuing Operations to EBITDA, Adjusted EBITDA from Continuing Operations and Total Adjusted EBITDA:












Three Months Ended December 31,


Year Ended December 31,



2015


2014


2015


2014


Loss from continuing operations

$(34,412)


$(321,124)


$(195,167)


$ (457,178)


Depreciation and amortization

18,046


22,014


70,511


85,880


Interest expense, net

12,057


12,942


49,194


50,917


Income tax (benefit) expense

(77)


50


(117)


(12,463)


EBITDA

(4,386)


(286,118)


(75,579)


(332,844)











Adjustments:









Transaction-related costs, including earnout adjustments, net

(143)


(1,274)


(288)


(761)


Stock-based compensation

463


666


2,321


2,971


Legal and environmental costs, net

389


(3,555)


1,389

 [A] 

8,757


Impairment of long-lived assets

-


112,436


-


112,436


Impairment of goodwill

-


203,259


104,721


303,975


Restructuring, exit and other costs

9,875


-


11,536


205


Loss on extinguishment of debt

1,134


-


2,145


3,177


Integration, severance and rebranding costs

-


-


-


2,072


Loss (gain) on disposal of assets

877


(21)


(321)


(4,773)


Adjusted EBITDA from continuing operations

8,209


25,393


45,924


95,215


Adjusted EBITDA from discontinued operations

-


2,626


1,197


12,114


Total Adjusted EBITDA

$  8,209


$  28,019


$  47,121


$ 107,329











 [A] Legal and environmental costs, net include $0.5 million of certain litigation related fees that were not included as adjustments in prior quarters. 











Reconciliation of Income (Loss) from Discontinued Operations to EBITDA from Discontinued Operations and Adjusted EBITDA from Discontinued Operations:












Three Months Ended December 31,


 Year Ended December 31, 



2015


2014


2015


2014


Income (loss) from discontinued operations

$      531


$  (14,770)


$      (287)


$   (58,426)


Income tax benefit

(341)


(11,168)


(76)


(9,832)


EBITDA from discontinued operations

190


(25,938)


(363)


(68,258)


Adjustments:









Transaction-related costs

-


(336)


26


5,401


Legal and environmental costs

-


-


-


733


Impairment of long-lived assets

-


26,363


-


26,363


Impairment of goodwill

-


2,537


-


48,000


(Gain) loss on disposal of assets

(190)


-


1,534


(125)


Adjusted EBITDA from discontinued operations

$        -


$    2,626


$    1,197


$   12,114


 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

NON-GAAP RECONCILIATIONS (continued)

 (In thousands)

(Unaudited)














Reconciliation of QTD Segment Performance to Adjusted EBITDA














Three Months Ended December 31, 2015


Rocky Mountain


Northeast


Southern


Corporate


Total


Revenue


$              37,685


$   17,586


$  13,361


$          -


$    68,632


Direct operating expenses


31,744


14,458


11,624


-


57,826


General and administrative expenses


1,623


890


891


4,821


8,225


Depreciation and amortization


8,952


4,639


4,360


95


18,046


Operating loss


(4,634)


(2,400)


(9,499)


(4,916)


(21,449)


Operating margin %


(12.3%)


(13.6%)


(71.1%)


NA


(31.3%)


Loss from continuing operations before income taxes


(4,723)


(2,472)


(9,489)


(17,805)


(34,489)














Loss from continuing operations


(4,723)


(2,472)


(9,489)


(17,728)


(34,412)


Depreciation and amortization


8,952


4,639


4,360


95


18,046


Interest expense, net


99


150


53


11,755


12,057


Income tax benefit


-


-


-


(77)


(77)


EBITDA


$                4,328


$     2,317


$  (5,076)


$    (5,955)


$    (4,386)














Adjustments, net


4,192


167


6,358


1,878


12,595


Adjusted EBITDA from continuing operations


$                8,520


$     2,484


$   1,282


$    (4,077)


$     8,209


Adjusted EBITDA margin %


22.6%


14.1%


9.6%


NA


12.0%


























Three Months Ended December 31, 2014


Rocky Mountain


Northeast


Southern


Corporate


Total


Revenue


$              87,789


$   28,159


$  25,815


$          -


$  141,763


Direct operating expenses


58,822


23,344


21,167


-


103,333


General and administrative expenses


3,237


2,082


2,636


2,632


10,587


Depreciation and amortization


12,713


3,952


5,178


171


22,014


Operating loss


(302,678)


(1,219)


(3,166)


(2,803)


(309,866)


Operating margin %


(344.8%)


(4.3%)


(12.3%)


NA


(218.6%)


Loss from continuing operations before income taxes


(302,761)


(722)


(2,425)


(15,166)


(321,074)














Loss from continuing operations


(302,761)


(722)


(2,425)


(15,216)


(321,124)


Depreciation and amortization


12,713


3,952


5,178


171


22,014


Interest expense, net


117


383


79


12,363


12,942


Income tax expense


-


-


-


50


50


EBITDA


$           (289,931)


$     3,613


$   2,832


$    (2,632)


$(286,118)














Adjustments, net


315,712


(754)


(1,306)


(2,141)


311,511


Adjusted EBITDA from continuing operations


$              25,781


$     2,859


$   1,526


$    (4,773)


$    25,393


Adjusted EBITDA margin %


29.4%


10.2%


5.9%


NA


17.9%

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

NON-GAAP RECONCILIATIONS (continued)

 (In thousands)

(Unaudited)














Reconciliation of YTD Segment Performance to Adjusted EBITDA














Year Ended December 31, 2015


Rocky Mountain


Northeast


Southern


Corporate


Total


Revenue


$             196,021


$   92,135


$  68,543


$          -


$  356,699


Direct operating expenses


147,214


74,364


58,303


-


279,881


General and administrative expenses


6,824


4,606


4,891


23,006


39,327


Depreciation and amortization


35,043


16,667


18,188


613


70,511


Operating loss


(97,781)


(3,624)


(19,422)


(24,012)


(144,839)


Operating margin %


(49.9%)


(3.9%)


(28.3%)


NA


(40.6%)


Loss from continuing operations before income taxes


(97,632)


(4,228)


(19,526)


(73,898)


(195,284)














Loss from continuing operations


(97,632)


(4,228)


(19,526)


(73,781)


(195,167)


Depreciation and amortization


35,043


16,667


18,188


613


70,511


Interest expense, net


462


796


195


47,741


49,194


Income tax benefit


-


-


-


(117)


(117)


EBITDA


$             (62,127)


$   13,235


$   (1,143)


$  (25,544)


$  (75,579)














Adjustments, net


108,207


301


7,408


5,587


121,503


Adjusted EBITDA from continuing operations


$              46,080


$   13,536


$    6,265


$  (19,957)


$    45,924


Adjusted EBITDA margin %


23.5%


14.7%


9.1%


NA


12.9%


























Year Ended December 31, 2014


Rocky Mountain


Northeast


Southern


Corporate


Total


Revenue


$             334,770


$   95,577


$ 105,935


$          -


$  536,282


Direct operating expenses


226,850


78,621


86,987


-


392,458


General and administrative expenses


10,791


9,929


14,233


24,234


59,187


Depreciation and amortization


51,247


15,643


18,321


669


85,880


Operating loss


(269,813)


(42,447)


(80,491)


(24,903)


(417,654)


Operating margin %


(80.6%)


(44.4%)


(76.0%)


NA


(77.9%)


Loss from continuing operations before income taxes

(269,954)


(40,608)


(82,440)


(76,639)


(469,641)














Loss from continuing operations


(269,954)


(40,608)


(82,440)


(64,176)


(457,178)


Depreciation and amortization


51,247


15,643


18,321


669


85,880


Interest expense, net


619


1,284


455


48,559


50,917


Income tax benefit


-


-


-


(12,463)


(12,463)


EBITDA


$           (218,088)


$  (23,681)


$ (63,664)


$  (27,411)


$(332,844)














Adjustments, net


316,036


34,117


71,390


6,516


428,059


Adjusted EBITDA from continuing operations


$              97,948


$   10,436


$    7,726


$  (20,895)


$    95,215


Adjusted EBITDA margin %


29.3%


10.9%


7.3%


NA


17.8%

 


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 


 NON-GAAP RECONCILIATIONS (continued)


 (In thousands)


(Unaudited)











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





Three Months Ended December 31, 2015




As Reported


Special Items


As Adjusted



Revenue

$        68,632


$        -



$       68,632



Direct operating expenses

57,826


(4,876)

 [A] 


52,950



General and administrative expenses

8,225


(744)

 [B] 


7,481



Total costs and expenses

90,081


(11,604)

 [C] 


78,477



Operating loss

(21,449)


11,604

 [C] 


(9,845)



Loss from continuing operations

(34,412)


12,570

 [D] 


(21,842)












Basic and diluted loss from continuing operations

$          (1.24)





$         (0.79)












Loss from continuing operations

$       (34,412)





$      (21,842)



Depreciation and amortization

18,046





18,046



Interest expense, net

12,057





12,057



Income tax benefit

(77)





(52)



EBITDA and Adjusted EBITDA from continuing operations

$        (4,386)





$         8,209











Description of 2015 Special Items:








 [A] 

Special items include a loss on sale related to the disposal of certain transportation related assets and the write-off of pipeline related assets in connection with a contract termination


 [B] 

Primarily attributable to stock-based compensation, and non-routine litigation expenses


 [C] 

Primarily includes the aforementioned adjustments, and approximately $5.9 million associated with a long-lived asset impairment charge recorded in the Southern division as part of the Company's restructuring plan.


 [D] 

Primarily includes the aforementioned adjustments along with a charge of $1.1 million in connection with a write-off of a portion of the unamortized deferred financing costs associated with our Amended Revolving Credit Facility.  The Company also recorded a net reduction related to a prior acquisition earnout reserve of $0.1 million in the three months ended December 31, 2015. Additionally, our effective tax rate for the three months ended December 31, 2015 was near zero percent and has been applied to the special items accordingly.






Three Months Ended December 31, 2014




As Reported


Special Items


As Adjusted



Revenue

$      141,763


$        -



$     141,763



Direct operating expenses

103,333


301

 [E] 


103,634



General and administrative expenses

10,587


2,160

 [F] 


12,747



Total costs and expenses

451,629


(313,234)

 [G] 


138,395



Operating (loss) income

(309,866)


313,234

 [G] 


3,368



Loss from continuing operations

(321,124)


311,511

 [H] 


(9,613)












Basic and diluted loss from continuing operations

$        (11.84)





$         (0.35)












Loss from continuing operations

$     (321,124)





$       (9,613)



Depreciation and amortization

22,014





22,014



Interest expense, net

12,942





12,942



Income tax expense

50





50



EBITDA and Adjusted EBITDA from continuing operations

$     (286,118)





$       25,393











Description of 2014 Special Items:








 [E] 

Special items include gain on sale related to the disposal of certain transportation assets, offset by a charge related to a contract settlement and environmental reserve adjustments primarily attributed to business in the Southern division.


 [F] 

Primarily attributable to litigation, stock-based compensation and integration and rebranding expenses. 


 [G] 

Primarily includes the aforementioned adjustments and $112.4 million of long-lived asset impairment charge related to the write-off of the Company's customer relationship intangible asset attributable to business in the Rocky Mountain division and $203.3 million  of goodwill impairment charge attributable to business in the Rocky Mountain division for the three months ended December 31, 2014.


 [H] 

Includes $112.4 million of long-lived asset impairment charge related to the write-off of the Company's customer relationship intangible asset attributable to business in the Rocky Mountain division and $203.3 million  of goodwill impairment charge attributable to business in the Rocky Mountain division for the three months ended December 31, 2014.  Additionally, the Company recorded a net reduction related to a prior acquisition earnout reserve of $1.7 million in the three months ended December 31, 2014. The Company's effective tax rate for the three months ended December 31, 2014 was zero percent and has been applied to the special items accordingly.


 


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 


NON-GAAP RECONCILIATIONS (continued)


 (In thousands)


(Unaudited)











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





Year Ended December 31, 2015




As Reported


Special Items


As Adjusted



Revenue

$      356,699


$        -



$     356,699



Direct operating expenses

279,881


(3,678)

 [A] 


276,203



General and administrative expenses

39,327


(4,149)

 [B] 


35,178



Total costs and expenses

501,538


(119,646)

 [C] 


381,892



Operating loss

(144,839)


119,646

 [C] 


(25,193)



Loss from continuing operations

(195,167)


121,381

 [D] 


(73,786)












Basic and diluted loss from continuing operations

$          (7.05)





$         (2.67)












Loss from continuing operations

$     (195,167)





$      (73,786)



Depreciation and amortization

70,511





70,511



Interest expense, net

49,194





49,194



Income tax (benefit) expense

(117)





5



EBITDA and Adjusted EBITDA from continuing operations

$       (75,579)





$       45,924











Description of 2015 Special Items:








 [A] 

Special items include a gain on sale related to the disposal of certain transportation related assets and the write-off of pipeline related assets in connection with a contract termination


 [B] 

Primarily attributable to stock-based compensation, non-routine litigation expenses and a gain related to the sale of assets.


 [C] 

Primarily includes the aforementioned adjustments, and a charge of approximately $7.1 million associated our restructuring initiative and other exit related costs from certain shale basins and approximately $104.7 million associated with a goodwill impairment charge recorded for the Rocky Mountain division.


 [D] 

Primarily includes the aforementioned adjustments, along with a charge of $2.1 million in connection with a write-off of a portion of the unamortized deferred financing costs associated with our ABL Facility and a net reduction related to a prior acquisition earnout reserve of $0.3 million. Additionally, our effective tax rate for the year ended December 31, 2015 was zero percent and has been applied to the special items accordingly.








Year Ended December 31, 2014




As Reported


Special Items


As Adjusted



Revenue

$      536,282


$        -



$     536,282



Direct operating expenses

392,458


1,930

 [E] 


394,388



General and administrative expenses

59,187


(11,708)

 [F] 


47,479



Total costs and expenses

953,936


(426,189)

 [G] 


527,747



Operating (loss) income

(417,654)


426,189

 [G] 


8,535



Loss from continuing operations

(457,178)


416,501

 [H] 


(40,677)












Basic and diluted loss from continuing operations

$        (17.52)





$         (1.56)












Loss from continuing operations

$     (457,178)





$      (40,677)



Depreciation and amortization

85,880





85,880



Interest expense, net

50,917





50,917



Income tax benefit

(12,463)





(905)



EBITDA and Adjusted EBITDA from continuing operations

$     (332,844)





$       95,215











Description of 2014 Special Items:








 [E] 

Special items include gain on sale related to the disposal of certain transportation assets, offset by a charge related to a contract settlement and environmental reserve adjustments primarily attributed to business in the Southern division.


 [F] 

Primarily attributable to litigation, stock-based compensation and integration and rebranding expenses. 


 [G] 

Primarily includes the aforementioned adjustments, and goodwill impairment charges totaling $203.3 million, $33.8 million and $66.9 million attributable to business in the Rocky Mountain, Northeast, and Southern division, respectively, for the full-year ended December 31, 2014. 


 [H] 

Includes goodwill impairment charges totaling $203.3 million, $33.8 million and $66.9 million attributable to business in the Rocky Mountain, Northeast, and Southern division, respectively, for the full-year ended December 31, 2014.  In March 2014, the Company wrote-off a portion of the unamortized deferred financing costs associated with its Amended Revolving Credit Facility of approximately $3.2 million.  Additionally, the Company recorded a net reduction related to a prior acquisition earnout reserve of $1.3 million for the full year ended December 31, 2014.  The Company's effective tax rate for the year ended December 31, 2014 of 2.7% and has been applied to the special items accordingly.


 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

 NON-GAAP RECONCILIATIONS (continued)

 (In thousands)

(Unaudited)









Reconciliation of Free Cash Flow from Continuing Operations
















Year Ended December 31,





2015


2014



Net cash provided by operating activities from continuing operations


$ 49,827


$  17,376



Less: net cash capital expenditures, [A]


(6,469)


(45,539)



Free Cash Flow


$ 43,358


$(28,163)










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

Logo - http://photos.prnewswire.com/prnh/20141008/150889

 

SOURCE Nuverra Environmental Solutions, Inc.