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Nuverra Announces Fourth Quarter And Full Year 2017 Results
- Q4 2017 revenue up 30% driven by improved pricing and increased business activity -
- Company achieves 2017 full year revenue growth of 16% -

SCOTTSDALE, Ariz., March 5, 2018 /PRNewswire/ -- Nuverra Environmental Solutions, Inc. (NYSE American: NES) ("Nuverra" or the "Company") today announced financial and operating results for the fourth quarter and full year ended December 31, 2017.

SUMMARY OF FINANCIAL RESULTS

  • Fourth quarter revenue was $46.4 million, an increase of approximately 29.8%, or $10.6 million, when compared with $35.8 million in the fourth quarter of 2016.
  • Net loss for the fourth quarter was $30.9 million, a reduction of $30.4 million, or approximately 49.6%, when compared with a net loss of $61.3 million in the fourth quarter of 2016.
  • Loss from continuing operations, adjusted for special items, for the fourth quarter was $17.3 million, compared with $26.0 million in the fourth quarter of 2016.
  • Adjusted EBITDA from continuing operations for the fourth quarter was $5.1 million, an increase of $2.6 million compared with $2.5 million in the fourth quarter of 2016.
  • Fourth quarter Adjusted EBITDA margin improved by 400 basis points.
  • Total liquidity as of December 31, 2017 was $20.5 million.

"Nuverra was well positioned to capitalize on an improved operating environment in the second half of 2017," said Ed Lang, Chief Financial Officer. "We exited the year with strong financial results, including double digit topline growth and expanding margins.  The industry momentum is continuing in 2018 and we are seeing increased drilling activity in all basins which we service.  With our attractive asset base and improved liquidity position, we are investing to further improve and grow our business platform and expect to deliver another year of favorable results in 2018."

FOURTH QUARTER 2017 RESULTS

Fourth quarter revenue was $46.4 million, an increase of $10.6 million, or 29.8%, from $35.8 million in the fourth quarter of 2016.  Approximately 10.2% of the increase in revenue is attributable to pricing increases, while 19.6% is a result of increases in activities.

As a result of increased activity and a change in depreciation related to the application of fresh start accounting upon emergence from chapter 11, total costs and expenses, adjusted for special items, were $62.3 million, a 29.8% increase compared with $48.0 million in the fourth quarter of 2016.

Net loss for the fourth quarter was $30.9 million, a reduction of $30.4 million when compared with a net loss of $61.3 million in the fourth quarter of 2016.  For the fourth quarter of 2017, the Company reported a net loss from continuing operations, adjusted for special items, of $17.3 million. Special items in the fourth quarter primarily included the loss on the sale of underutilized assets, non-recurring legal and professional fees, stock-based compensation expense, as well as $2.5 million in long-lived asset impairment charges for assets held for sale in the Rocky Mountain division.  This compares with a loss from continuing operations, adjusted for special items, of $26.0 million in the fourth quarter of 2016.

Adjusted EBITDA from continuing operations for the fourth quarter was $5.1 million, an increase of $2.6 million compared with $2.5 million in the fourth quarter of 2016.  Fourth quarter adjusted EBITDA margin from continuing operations was 11.1%, compared with 7.1% in the fourth quarter of 2016.

FULL YEAR 2017 RESULTS

Revenue for the year was $176.1 million, an increase of $23.9 million, or 15.7%, when compared with $152.2 million for 2016.  Due to oil prices becoming more stable in 2017, customer demand for our services increased in all divisions in which we operate as compared to the same period in the prior year.  Approximately 3.9% of the increase in revenue is attributable to pricing increases, while 11.8% is a result of increases in activities.

As a result of the application of fresh start accounting upon emergence from chapter 11, net income for the full year was $120.7 million, compared to a net loss of $168.9 million in the prior year.  Net loss from continuing operations for the year, adjusted for special items, was $79.6 million, compared with a loss of $108.0 million for 2016.  Year-to-date special items primarily included $218.0 million of capital reorganization costs incurred in connection with the application of fresh start accounting and after emergence from chapter 11 recorded to "Reorganization items, net."  Additionally, special items included the loss on the sale of underutilized assets, stock-based compensation expense, a $4.3 million gain on the change in fair value of the derivative warrant liability, and $4.9 million in long-lived asset impairment charges for assets held for sale in the Rocky Mountain and Southern divisions.

Adjusted EBITDA from continuing operations for the full year was $13.3 million, an increase of 70.0% when compared with 2016.  Adjusted EBITDA margin from continuing operations for 2017 was 7.6%, compared with 5.2% in 2016.

CASH FLOW AND LIQUIDITY

Net cash used in operating activities from continuing operations for the full year ended December 31, 2017 was $25.4 million, while asset sales net of capital expenditures from continuing operations provided proceeds of $1.7 million.

Total liquidity as of December 31, 2017, consisting of cash and cash equivalents, available borrowings under our senior secured revolving credit facility and a delayed draw available on our second lien term loan facility, was $20.5 million.  As of December 31, 2017, total debt outstanding was $39.1 million, consisting of $14.3 million under our senior secured term loan facility, $21.0 million under our second lien term loan facility, and $3.8 million of capital leases for vehicle financings.

BASIS OF PRESENTATION

As previously disclosed, the Company emerged from chapter 11 bankruptcy on August 7, 2017, or the "Effective Date," and elected to apply fresh start accounting as of July 31, 2017 to coincide with the timing of the normal accounting period close.  References to "Successor" relate to the financial position and results of operations of the reorganized Company subsequent to July 31, 2017, while references to "Predecessor" refer to the financial position and results of operations of the Company on and prior to July 31, 2017.  The Successor and Predecessor GAAP results for the applicable periods are presented in the tables following this release.

For discussion purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.  However, because of various adjustments to the condensed consolidated financial statements in connection with the application of fresh start accounting, the results of operations for the Successor period are not comparable to those of the Predecessor period.  The Company believes that, subject to consideration of the impact of fresh start accounting, combining the results of the Successor and Predecessor periods provides meaningful information about the financial results of the Company, including revenues and costs that assist a reader in understanding the financial results for the applicable periods.

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, and disposal of restricted solids, water, wastewater, waste fluids, and hydrocarbons. The Company provides its suite of environmentally compliant and sustainable solutions to customers who demand stricter environmental compliance and accountability from their service providers. Find additional information about Nuverra in documents filed with the U.S. Securities and Exchange Commission ("SEC") at http://www.sec.gov.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended.  You can identify these and other forward-looking statements by the use of words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "might," "will," "should," "would," "could," "potential," "future," "continue," "ongoing," "forecast," "project," "target" or similar expressions, and variations or negatives of these words.

These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, and any forward-looking statements contained herein are based on information available to us as of the date of this press release and our current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured, and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include, among others: the effects of the restructuring on the Company and the interests of various constituents; risks and uncertainties associated with the restructuring process, including the outcome of a pending appeal of the order confirming the plan of reorganization and our ability to execute the requirements of the plan of reorganization subsequent to the Effective Date; our inability to maintain relationships with suppliers, customers, employees and other third parties as a result of our chapter 11 filing; the length of time the Company will operate under chapter 11 protection; risks associated with our indebtedness, including changes to interest rates, deterioration in the value of our machinery and equipment or accounts receivables, our ability to manage our liquidity needs and to comply with covenants under our credit facilities; our ability to attract, motivate and retain key executives and qualified employees in key areas of our business, including as a result of our completed chapter 11 restructuring; financial results that may be volatile and may not reflect historical trends due to, among other things, changes in commodity prices or general market conditions, acquisition and disposition activities, fluctuations in consumer trends, pricing pressures, changes in raw material or labor prices or rates related to our business and changing regulations or political developments in the markets in which we operate; our ability to attract and retain a sufficient number of qualified truck drivers in light of industry-wide driver shortages and high-turnover; the availability of less favorable credit and payment terms due to the downturn in our industry, our financial condition and the chapter 11 proceeding, including more stringent or costly payment terms from our vendors, which may further constrain our liquidity and reduce availability under our revolving credit facility; risks associated with our capital structure, including our ability to access necessary funding to generate sufficient operating cash flow to meet our debt service obligations; risks associated with the limited trading volume of our common stock on the NYSE American Stock Exchange, including fluctuations in the trading prices of our common stock; present and possible future claims, litigation or enforcement actions or investigations and their potential impact; difficulties in identifying, negotiating, executing, and completing acquisitions and divestitures, in connection with our strategic initiatives, and differences in the type and availability of consideration or financing for such acquisitions and divestitures; difficulties in successfully executing our growth initiatives, including difficulties in permitting, financing and constructing pipelines and waste treatment assets and in structuring economically viable agreements with potential customers, joint venture partners, financing sources and other parties; pricing pressures; risks associated with the operation, construction and development of saltwater disposal wells, solids and liquids treatment and transportation assets, landfills and pipelines, including access to additional locations and rights-of-way, environmental remediation obligations, unscheduled delays or inefficiencies and reductions in volume due to micro- and macro-economic factors or the availability of less expensive alternatives; risks associated with new technologies and the impact on our business; current and projected future uncertainties in commodities markets, including low oil and/or natural gas prices, and the potential impact on our ability to collect outstanding receivables as a result of the liquidity constraints on our customers; changes in customer drilling and completion activities and capital expenditure plans; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; shifts in production in shale areas where we operate and/or shale areas where we currently do not have operations; control of costs and expenses; and the regulatory environment.

The forward-looking statements contained, or incorporated by reference, herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's views as of the date of this press release. The Company undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, changes in expectations or otherwise. Additional risks and uncertainties are disclosed from time to time in the Company's filings with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Source: Nuverra Environmental Solutions, Inc.
602-903-7802
[email protected]

- Tables to Follow -

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)



Successor



Predecessor


Three Months
Ended



Three Months
Ended


December 31,



December 31,


2017



2016

Revenue:





Service revenue

$

41,775




$

32,348


Rental revenue

4,655




3,434


Total revenue

46,430




35,782


Costs and expenses:





Direct operating expenses

40,967




28,602


General and administrative expenses

5,687




9,034


Depreciation and amortization

21,230




14,693


Impairment of long-lived assets

2,500




31,712


Total costs and expenses

70,384




84,041


Loss from operations

(23,954)




(48,259)


Interest expense, net

(1,409)




(13,856)


Other income, net

117




754


Reorganization items, net

(6,037)





Loss before income taxes

(31,283)




(61,361)


Income tax benefit

381




45


Net loss

$

(30,902)




$

(61,316)







Earnings per common share:





Net loss per basic common share

$

(2.64)




$

(0.45)







Net loss per diluted common share

$

(2.64)




$

(0.45)







Weighted average shares outstanding:





Basic

11,696




137,702


Diluted

11,696




137,702


 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)



Successor



Predecessor


Five Months
Ended



Seven Months
Ended


Year Ended


December 31, 2017



July 31, 2017


December 31, 2016

Revenue:







Service revenue

$

72,395




$

86,564



$

139,886


Rental revenue

7,793




9,319



12,290


Total revenue

80,188




95,883



152,176


Costs and expenses:







Direct operating expenses

67,077




81,010



129,624


General and administrative expenses

10,615




22,552



37,013


Depreciation and amortization

38,551




28,981



60,763


    Impairment of long-lived assets

4,904






42,164


Total costs and expenses

121,147




132,543



269,564


Operating loss

(40,959)




(36,660)



(117,388)


Interest expense, net

(2,187)




(22,792)



(54,530)


Other income, net

411




4,247



5,778


Loss on extinguishment of debt






(674)


Reorganization items, net

(5,507)




223,494




(Loss) income from continuing operations before income taxes

(48,242)




168,289



(166,814)


Income tax benefit (expense)

347




322



(807)


(Loss) income from continuing operations

(47,895)




168,611



(167,621)


Loss from discontinued operations, net of income taxes






(1,235)


Net (loss) income

$

(47,895)




$

168,611



$

(168,856)









Earnings per common share:







Basic (loss) income from continuing operations

$

(4.09)




$

1.12



$

(1.84)


Basic loss from discontinued operations






(0.01)


Net (loss) income per basic common share

$

(4.09)




$

1.12



$

(1.85)









Diluted (loss) income from continuing operations

$

(4.09)




$

0.97



$

(1.84)


Diluted loss from discontinued operations






(0.01)


Net (loss) income per diluted common share

$

(4.09)




$

0.97



$

(1.85)









Weighted average shares outstanding:







Basic

11,696




150,940



90,979


Diluted

11,696




174,304



90,979


 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)



Successor



Predecessor


December 31,



December 31,


2017



2016

Assets





Cash and cash equivalents

$

5,488




$

994


Restricted cash

1,296




1,420


Accounts receivable, net

30,965




23,795


Inventories

4,089




2,464


Prepaid expenses and other receivables

8,594




3,516


Other current assets

226




107


Assets held for sale

2,765




1,182


Total current assets

53,423




33,478


Property, plant and equipment, net

229,874




294,179


Equity investments

48




73


Intangibles, net

547




14,310


Goodwill

27,139





Deferred income taxes

84





Other assets

207




564


Total assets

$

311,322




$

342,604


Liabilities and Shareholders' Equity





Accounts payable

$

7,946




$

4,047


Accrued liabilities

13,939




18,787


Current contingent consideration

500





Current portion of long-term debt

5,525




465,835


Derivative warrant liability

477




4,298


Total current liabilities

28,387




492,967


Deferred income taxes




495


Long-term debt

33,524




5,956


Long-term contingent consideration




8,500


Other long-term liabilities

6,438




3,752


Total liabilities

68,349




511,670


Commitments and contingencies





Shareholders' equity (deficit):





Common stock

117




152


Additional paid-in capital

290,751




1,407,867


Treasury stock




(19,807)


Accumulated deficit

(47,895)




(1,557,278)


Total shareholders' equity (deficit)

242,973




(169,066)


Total liabilities and shareholders' equity

$

311,322




$

342,604


 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



Successor



Predecessor


Five Months
Ended



Seven Months
Ended


Year Ended


December 31,



July 31,


December 31,


2017



2017


2016

Cash flows from operating activities:







Net (loss) income

$

(47,895)




$

168,611



$

(168,856)


Adjustments to reconcile net (loss) income to net cash used in operating activities:







   Loss on the sale of TFI






1,235


   Depreciation and amortization of intangible assets

38,551




28,981



60,763


   Amortization of debt issuance costs, net




2,135



6,165


   Accrued interest added to debt principal

473




11,474



26,684


   Stock-based compensation

677




457



1,125


   Impairment of long-lived assets

4,904






42,164


   Gain on sale of UGSI

(76)






(1,747)


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

5,695




(258)



3,512


   Bad debt expense

91




788



(283)


   Change in fair value of derivative warrant liability

(239)




(4,025)



(3,311)


   Loss on extinguishment of debt






674


   Deferred income taxes

(242)




(337)



225


   Other, net

4,503




(11,295)



560


   Reorganization items, non-cash




(218,600)




   Changes in operating assets and liabilities:







      Accounts receivable

(3,521)




(4,528)



18,676


      Prepaid expenses and other receivables

(312)




472



(285)


      Accounts payable and accrued liabilities

(5,034)




3,682



(13,507)


      Other assets and liabilities, net

(4,036)




3,494



(45)


Net cash used in operating activities

(6,461)




(18,949)



(26,251)


Cash flows from investing activities:







   Proceeds from the sale of property, plant and equipment

4,034




3,083



10,696


   Purchases of property, plant and equipment

(2,231)




(3,149)



(3,826)


   Proceeds from the sale of UGSI

76






5,032


   Change in restricted cash

6,509




(6,385)



2,830


Net cash provided by (used in) investing activities

8,388




(6,451)



14,732


Cash flows from financing activities:







   Proceeds from Predecessor revolving credit facility




106,785



154,514


   Payments on Predecessor revolving credit facility




(129,964)



(233,667)


   Proceeds from Predecessor term loan




15,700



55,000


   Proceeds from debtor in possession term loan




6,875




   Proceeds from Successor First and Second Lien Term Loans




36,053




   Payments on Successor First and Second Lien Term Loans

(1,241)







   Proceeds from Successor revolving facility

79,464







   Payments on Successor revolving facility

(79,464)







   Payments for debt issuance costs




(1,053)



(1,029)


   Issuance of stock






5,000


   Payments on vehicle financing and other financing activities

(2,391)




(2,797)



(6,614)


Net cash (used in) provided by financing activities

(3,632)




31,599



(26,796)


Net (decrease) increase in cash and cash equivalents

(1,705)




6,199



(38,315)


Cash and cash equivalents - beginning of period

7,193




994



39,309


Cash and cash equivalents - end of period

$

5,488




$

7,193



$

994


 

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 evaluating the Company's ongoing financial results and trends. Management uses this non-GAAP information as an indicator of business results, and evaluates overall performance with respect to such indicators. Management believes that excluding items such as acquisition expenses, amortization of intangible assets, stock-based compensation, asset impairments, restructuring charges, expenses related to litigation and resolution of lawsuits, and other charges, which may or may not be non-recurring, among other items that are inconsistent in amount and frequency (as with acquisition expenses), or determined pursuant to complex formulas that incorporate factors, such as market volatility, that are beyond our control (as with stock-based compensation), for purposes of calculating these non-GAAP financial measures facilitates a more meaningful evaluation of the Company's current operating performance and comparisons to the past and future operating performance. The Company believes that providing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share, in addition to related GAAP financial measures, provides investors with greater transparency to the information used by the Company's management. These non-GAAP financial measures are not substitutes for measures of performance or liquidity calculated in accordance with GAAP and may not necessarily be indicative of the Company's liquidity or ability to fund cash needs. Not all companies calculate non-GAAP financial measures in the same manner, and our presentation may not be comparable to the presentations of other companies.

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017 for these non-GAAP reconciliations.  The combination was generated by addition of comparable financial statement line item captions.  However, because of various adjustments to the condensed consolidated financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor period are not comparable to those of the Predecessor period.  The financial information preceding these non-GAAP reconciliations provides the Successor and Predecessor GAAP results for the applicable periods.  The Company believes that subject to consideration of the impact of fresh start accounting, combining the results of the Successor and Predecessor periods provides meaningful information about the financial results of the Company, including revenues and costs that assist a reader in understanding the financial results for the applicable periods.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)


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



Three Months Ended


Year Ended


December 31,


December 31,


2017


2016


2017 [1]


2016

(Loss) income from continuing operations

$

(30,902)



$

(61,316)



$

120,716



$

(167,621)


Depreciation and amortization

21,230



14,693



67,532



60,763


Interest expense, net

1,409



13,856



24,979



54,530


Income tax (benefit) expense

(381)



(45)



(669)



807


EBITDA

(8,644)



(32,812)



212,558



(51,521)


Adjustments:








Transaction-related costs, including earnout adjustments, net







(117)


Stock-based compensation

496



217



1,134



1,125


Change in fair value of derivative warrant liability

(379)



(737)



(4,264)



(3,311)


Capital reorganization costs [2]



4,033



9,448



14,310


Reorganization items, net [3]

6,036





(217,987)




Legal and environmental costs, net

124



(99)



2,168



3,128


Impairment of long-lived assets

2,500



31,712



4,904



42,164


Restructuring, exit and other costs







(379)


Loss on extinguishment of debt







674


Gain on the sale of UGSI





(76)



(1,747)


Loss on disposal of assets

5,008



219



5,437



3,512


Total Adjusted EBITDA

$

5,141



$

2,533



$

13,322



$

7,838




[1]

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.

[2]

Capital reorganization costs in 2017 represent costs related to the chapter 11 filing incurred prior to the May 1, 2017 filing date.  Capital reorganization costs in 2016 represent costs incurred for the debt exchange executed in 2016.

[3]

Reorganization items, net represents the costs related to the chapter 11 filing incurred after the May 1, 2017 filing date.

 

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, 2017


Rocky
Mountain


Northeast


Southern


Corporate


Total

Revenue


$

25,920



$

10,075



$

10,435



$



$

46,430


Direct operating expenses


24,457



8,874



7,636





40,967


General and administrative expenses


1,362



696



745



2,884



5,687


Depreciation and amortization


10,088



5,982



5,112



48



21,230


Loss from operations


(12,487)



(5,477)



(3,058)



(2,932)



(23,954)


Operating margin %


(48.2)

%


(54.4)

%


(29.3)

%


NA



(51.6)

%

Reorganization items, net


(464)



(42)



(63)



(5,468)



(6,037)


Loss from continuing operations before income taxes


(13,029)



(5,792)



(3,362)



(9,100)



(31,283)













Loss from continuing operations


(13,029)



(5,791)



(3,361)



(8,721)



(30,902)


Depreciation and amortization


10,088



5,982



5,112



48



21,230


Interest expense, net


102



113



114



1,080



1,409


Income tax benefit




(1)



(1)



(379)



(381)


EBITDA


$

(2,839)



$

303



$

1,864



$

(7,972)



$

(8,644)













Adjustments, net


7,026



97



1,095



5,567



13,785


Adjusted EBITDA from continuing operations


$

4,187



$

400



$

2,959



$

(2,405)



$

5,141


Adjusted EBITDA margin %


16.2

%


4.0

%


28.4

%


NA



11.1

%

 

Three months ended December 31, 2016


Rocky
Mountain


Northeast


Southern


Corporate


Total

Revenue


$

19,541



$

8,104



$

8,137



$



$

35,782


Direct operating expenses


15,386



7,668



5,548





28,602


General and administrative expenses


1,193



757



603



6,481



9,034


Depreciation and amortization


8,073



2,856



3,705



59



14,693


Loss from operations


(36,823)



(3,177)



(1,719)



(6,540)



(48,259)


Operating margin %


(188.4)

%


(39.2)

%


(21.1)

%


NA



(134.9)

%

Loss from continuing operations before income taxes


(36,863)



(3,242)



(1,725)



(19,531)



(61,361)













Loss from continuing operations


(36,863)



(3,241)



(1,724)



(19,488)



(61,316)


Depreciation and amortization


8,073



2,856



3,705



59



14,693


Interest expense, net


57



64



7



13,728



13,856


Income tax benefit




(1)



(1)



(43)



(45)


EBITDA


$

(28,733)



$

(322)



$

1,987



$

(5,744)



$

(32,812)













Adjustments, net


31,701



97



79



3,468



35,345


Adjusted EBITDA from continuing operations


$

2,968



$

(225)



$

2,066



$

(2,276)



$

2,533


Adjusted EBITDA margin %


15.2

%


(2.8)

%


25.4

%


NA



7.1

%

 

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, 2017 [1]


Rocky
Mountain


Northeast


Southern


Corporate


Total

Revenue


$

103,033



$

37,985



$

35,053



$



$

176,071


Direct operating expenses


87,073



35,953



25,061





148,087


General and administrative expenses


6,517



3,073



3,258



20,319



33,167


Depreciation and amortization


34,072



16,168



17,075



217



67,532


Loss from operations


(29,295)



(17,209)



(10,579)



(20,536)



(77,619)


Operating margin %


(28.4)

%


(45.3)

%


(30.2)

%


NA



(44.1)

%

Reorganization items, net


(5,597)



27,902



22,360



173,322



217,987


(Loss) income from continuing operations before income taxes


(35,073)



10,375



11,544



133,201



120,047













(Loss) income from continuing operations


(35,073)



10,376



11,545



133,868



120,716


Depreciation and amortization


34,072



16,168



17,075



217



67,532


Interest expense, net


363



333



257



24,026



24,979


Income tax benefit




(1)



(1)



(667)



(669)


EBITDA


$

(638)



$

26,876



$

28,876



$

157,444



$

212,558













Adjustments, net


15,542



(27,258)



(20,694)



(166,826)



(199,236)


Adjusted EBITDA from continuing operations


$

14,904



$

(382)



$

8,182



$

(9,382)



$

13,322


Adjusted EBITDA margin %


14.5

%


(1.0)

%


23.3

%


NA



7.6

%




[1]

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.

 

Year Ended December 31, 2016


Rocky
Mountain


Northeast


Southern


Corporate


Total

Revenue


$

82,564



$

36,446



$

33,166



$



$

152,176


Direct operating expenses


65,066



36,673



27,885





129,624


General and administrative expenses


5,951



2,632



2,951



25,479



37,013


Depreciation and amortization


31,498



13,446



15,559



260



60,763


Loss from operations


(51,663)



(24,330)



(15,656)



(25,739)



(117,388)


Operating margin %


(62.6)

%


(66.8)

%


(47.2)

%


NA



(77.1)

%

Loss from continuing operations before income taxes


(51,951)



(24,226)



(15,741)



(74,896)



(166,814)













Loss from continuing operations


(51,951)



(24,225)



(15,786)



(75,659)



(167,621)


Depreciation and amortization


31,498



13,446



15,559



260



60,763


Interest expense, net


411



432



146



53,541



54,530


Income tax (benefit) expense




(1)



45



763



807


EBITDA


$

(20,042)



$

(10,348)



$

(36)



$

(21,095)



$

(51,521)













Adjustments, net


34,209



8,917



4,627



11,606



59,359


Adjusted EBITDA from continuing operations


$

14,167



$

(1,431)



$

4,591



$

(9,489)



$

7,838


Adjusted EBITDA margin %


17.2

%


(3.9)

%


13.8

%


NA



5.2

%

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)


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



Three months ended December 31, 2017


As Reported


Special Items


As Adjusted

Revenue

$

46,430



$




$

46,430


Direct operating expenses

40,967



(5,018)


[A]


35,949


General and administrative expenses

5,687



(610)


[B]


5,077


Total costs and expenses

70,384



(8,128)


[C]


62,256


Loss from operations

(23,954)



8,128


[C]


(15,826)


Loss from continuing operations

(30,902)



13,617


[D]


(17,285)









Loss from continuing operations

$

(30,902)






$

(17,285)


Depreciation and amortization

21,230






21,230


Interest expense, net

1,409






1,409


Income tax benefit

(381)






(213)


EBITDA and Adjusted EBITDA from continuing operations

$

(8,644)






$

5,141



Description of 2017 Special Items:

[A]

Special items primarily includes the loss on sale of underutilized assets.

[B]

Primarily attributable to stock-based compensation and non-routine legal expenses.

[C]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $2.5 million for assets classified as held-for-sale in the Rocky Mountain division.

[D]

Primarily includes the aforementioned adjustments along with $6.0 million of capital reorganization costs incurred after the chapter 11 filing recorded to "Reorganization items, net," offset by a gain of $0.4 million associated with the change in fair value of the derivative warrant liability.  Additionally, our effective tax rate for the three months ended December 31, 2017 was (1.2)% 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 Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations



Three months ended December 31, 2016


As Reported


Special Items


As Adjusted

Revenue

$

35,782



$




$

35,782


Direct operating expenses

28,602



(218)


[E]


28,384


General and administrative expenses

9,034



(4,152)


[F]


4,882


Total costs and expenses

84,041



(36,082)


[G]


47,959


Loss from operations

(48,259)



36,082


[G]


(12,177)


Loss from continuing operations

(61,316)



35,319


[H]


(25,997)









Loss from continuing operations

$

(61,316)






$

(25,997)


Depreciation and amortization

14,693






14,693


Interest expense, net

13,856






13,856


Income tax benefit

(45)






(19)


EBITDA and Adjusted EBITDA from continuing operations

$

(32,812)






$

2,533



Description of 2016 Special Items:

[E]

Special items primarily includes the loss on sale of underutilized assets.

[F]

Primarily attributable to stock-based compensation, non-routine litigation expenses, non-routine professional fees and $4.0 million for capital reorganization costs incurred for the debt exchange executed in 2016.

[G]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $31.7 million for assets determined to be impaired in the Rocky Mountain division.

[H]

Primarily includes the aforementioned adjustments along with a gain of $0.7 million associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the three months ended December 31, 2016 was near 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 Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations



Year Ended December 31, 2017 [1]


As Reported


Special Items


As Adjusted

Revenue

$

176,071



$




$

176,071


Direct operating expenses

148,087



(6,032)


[A]


142,055


General and administrative expenses

33,167



(12,155)


[B]


21,012


Total costs and expenses

253,690



(23,091)


[C]


230,599


Loss from operations

(77,619)



23,091


[C]


(54,528)


Income (loss) from continuing operations

120,716



(200,346)


[D]


(79,630)









Income (loss) from continuing operations

$

120,716






$

(79,630)


Depreciation and amortization

67,532






67,532


Interest expense, net

24,979






24,979


Income tax (benefit) expense

(669)






441


EBITDA and Adjusted EBITDA from continuing operations

$

212,558






$

13,322




[1]

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.



Description of 2017 Special Items:

[A]

Special items primarily includes capital re-organization costs incurred prior to the chapter 11 filing and the loss on the sale of underutilized assets.

[B]

Primarily attributable to capital re-organization costs of $8.8 million incurred prior to the chapter 11 filing, as well as stock-based compensation, non-routine litigation expenses and non-routine professional fees.

[C]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $4.9 million for assets classified as held-for-sale primarily in the Rocky Mountain division.

[D]

Primarily includes the aforementioned adjustments along with $218.0 million of capital reorganization costs incurred in connection with the application of fresh start accounting and after emergence from chapter 11 recorded to "Reorganization items, net," offset by a gain of $4.3 million associated with the change in fair value of the derivative warrant liability.  Additionally, our effective tax rate for the twelve months ended December 31, 2017 was (0.6)% 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 Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations



Year Ended December 31, 2016


As Reported


Special Items


As Adjusted

Revenue

$

152,176



$




$

152,176


Direct operating expenses

129,624



(5,850)


[E]


123,774


General and administrative expenses

37,013



(15,857)


[F]


21,156


Total costs and expenses

269,564



(63,871)


[G]


205,693


Loss from operations

(117,388)



63,871


[G]


(53,517)


Loss from continuing operations

(167,621)



59,646


[H]


(107,975)









Loss from continuing operations

$

(167,621)






$

(107,975)


Depreciation and amortization

60,763






60,763


Interest expense, net

54,530






54,530


Income tax expense

807






520


EBITDA and Adjusted EBITDA from continuing operations

$

(51,521)






$

7,838



Description of 2016 Special Items:

[E]

Special items primarily includes the loss on sale of underutilized assets and environmental clean-up charges.

[F]

Primarily attributable to stock-based compensation, non-routine legal and professional fees, and capital reorganization costs of $14.3 million incurred for the debt exchange executed in 2016

[G]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges for assets classified as assets-held-for-sale in the Northeast division of $2.4 million and the Southern division of $2.4 million, as well as impairment charges of $31.7 million for the Rocky Mountain division and $5.7 million for the Northeast division.

[H]

Primarily includes the aforementioned adjustments, along with a charge of $0.7 million in connection with the write-off of a portion of the unamortized deferred financing costs as a result of an amendment to our Predecessor Revolving Facility, a gain of $3.3 million associated with the change in fair value of the derivative warrant liability, and a gain on the sale of Underground Solutions, Inc. for $1.7 million.  Additionally, our effective tax rate for the twelve months ended December 31, 2016 was 0.5% 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,



2017 [1]


2016

Net cash used in operating activities from continuing operations


$

(25,410)



$

(26,251)


Less: net cash capital expenditures [2]


1,737



6,870


Free Cash Flow


$

(23,673)



$

(19,381)




[1]

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.

[2]

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

 

Year-Over-Year Revenue Growth by Price, Activity and Acquisition




Three Months Ended


Year Ended



December 31, 2017


December 31, 2017 [1]

Total Revenue Growth


$

10,648



29.8

%


$

23,895



15.7

%










Breakdown of Total Revenue Growth:









   Price


3,646



10.2



5,892



3.9


   Activity


7,002



19.6



18,003



11.8


   Acquisition











$

10,648



29.8

%


$

23,895



15.7

%



[1]

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.

 

Year-Over-Year Adjusted EBITDA Growth by Price, Activity, Acquisition, and Corporate




Three Months Ended


Year Ended



December 31, 2017


December 31, 2017 [1]

Total Adjusted EBITDA Growth


$

2,608



102.9

%


$

5,484



70.0

%










Breakdown of Total Adjusted EBITDA Growth:









   Price


3,263



128.8



4,876



62.2


   Activity/Expense


(527)



(20.8)



502



6.4


   Acquisition









   Corporate


(128)



(5.1)



106



1.4




$

2,608



102.9

%


$

5,484



70.0

%



[1]

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

SUPPLEMENTAL COMPANY AND INDUSTRY DATA

(Unaudited)


Company Assets and Utilization by Revenue Source




Year Ended



December 31, 2017

Water Trucks:



   Count (approximate)


550

   % Utilized [1]


52.0%




Salt Water Disposal Wells:



   Count


48

   % Utilized [2]


36.0%




Haynesville Pipeline:



   % Utilized [2] [3]


46% - 89%



[1]

Trucking utilization assumes a five day work-week and running twelve hours per day.

[2]

Salt Water Disposal Well and Pipeline utilization is calculated based on functional capacity rather than permitted capacity. Functional capacity reflects any factors limiting volume such as pressure limits, pump or tank capacity, etc. and can potentially be increased with additional capital investment.

[3]

The range of utilization for the Haynesville Pipeline represents the high and low for the year.

 

Industry Statistics for the Basins in which Nuverra Operates




Average for the

Year Ended


Average for the

Year Ended


Year-Over-Year



December 31, 2017


December 31, 2016


Growth %

Pricing:







   Oil price per barrel


$

50.80



$

43.29



17.3

%

   Natural gas price per tcf


$

2.99



$

2.52



18.7

%








Operating Rigs


227



132



72.0

%








Oil Production (barrels in thousands)


2,423



2,451



(1.1)

%








Natural Gas Production (Mcf/d)


38,755



36,229



7.0

%








Wells Completed


4,469



3,380



32.2

%








Drilled Uncompleted Ending Inventory


3,134



2,955



6.1

%

 

SOURCE Nuverra Environmental Solutions, Inc.