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Nuverra Announces Second-Quarter And Year-To-Date 2016 Results

SCOTTSDALE, Ariz., Aug. 8, 2016 /PRNewswire/ -- Nuverra Environmental Solutions, Inc. (OTCQB: NESC) ("Nuverra" or the "Company") today announced financial and operating results for the second quarter and six months ended June 30, 2016.

Nuverra Environmental Solutions, Inc. logo.

SUMMARY OF QUARTERLY RESULTS

  • Second quarter revenue was $34.0 million, a decrease of approximately 27.7%, or $13.0 million, when compared with revenue of $47.0 million in the first quarter of 2016, and a 63.2% decrease, or $58.4 million, when compared with revenue of $92.4 million in the second quarter of 2015.
  • Total costs and expenses, adjusted for special items, were $48.9 million, or a 20.2% decrease when compared with $61.3 million in the first quarter of 2016; 50.6% reduction in total costs and expenses, adjusted for special items, when compared with the second quarter of 2015.
  • Loss from continuing operations for the second quarter was $40.6 million, or a loss of $0.60 per diluted share, compared with a loss from continuing operations of $27.3 million, or a loss of $0.98 per diluted share in the first quarter of 2016.
  • Adjusted EBITDA from continuing operations for the second quarter was $0.3 million, a decrease of approximately 79.5% compared with adjusted EBITDA from continuing operations of $1.6 million in the first quarter of 2016.
  • Total liquidity as of June 30, 2016 was $12.9 million.

The Company closed its private exchange offer (the "Exchange Offer") during the second quarter by delivering to tendering holders of the Company's 9.875% Senior Notes due 2018 (the "2018 Notes") $327.2 million in aggregate principal amount of new Senior Second-Lien Notes due 2021 (the "2021 Notes") and $32.3 million in shares of common stock converted at $0.32 to those tendering holders who elected to exchange for common stock. Additionally, the Company closed on a new $24.0 million principal amount first-lien term loan (the "Term Loan") due 2018.  As part of the Exchange Offer, tendering holders of the 2018 Notes, other than the Chairman of the Board and Chief Executive Officer, Mark D. Johnsrud, received penny warrants to purchase up to 10% of our then-outstanding common stock, subject to certain anti-dilution provisions.  As a commitment fee for entering into the Term Loan, the lenders received penny warrants to purchase up to 5% of our then-outstanding common stock, subject to certain anti-dilution provisions.  Upon settlement of the Exchange Offer, there remained outstanding $40.4 million in aggregate principal amount of 2018 Notes.   

Mark D. Johnsrud stated, "While our second quarter results reflect the ongoing impact of lower overall customer drilling and completion activities and continued pricing pressures, we have taken aggressive steps to reduce costs and expenses and, as a result, achieved a $50.1 million or 50.6% decrease in total costs and expenses, adjusted for special items, compared to the second quarter of 2015.  Despite the prolonged decline in customer activity, intense price competition and resulting impact on our top-line revenue, Nuverra reported positive Adjusted EBITDA for the second quarter, which is a direct result of our aggressive approach to cost management during this downturn."

SECOND QUARTER 2016 RESULTS

Second quarter revenue was $34.0 million, a decrease of $13.0 million, or 27.7%, from $47.0 million in the first quarter of 2016. The decrease was attributable to lower overall drilling and completion activities coupled with pricing pressures driven by a highly competitive pricing environment in all divisions.  In the second quarter of 2015, the Company reported revenue of $92.4 million.

The Company continued to reduce costs and expenses in the second quarter as a result of decreasing activities and proactive cost-management initiatives. Total costs and expenses, adjusted for special items, were $48.9 million, a 20.2% decrease compared with total costs and expenses, adjusted for special items, of $61.3 million in the first quarter of 2016. The Company reported total costs and expenses, adjusted for special items, of $99.0 million in the second quarter of 2015.

On a year-over-year comparison with the second quarter of 2015, the $50.1 million reduction in total costs and expenses, adjusted for special items, included:

  • Approximately $19.6 million in lower payroll and related expenses, reflecting a 48% year-over-year reduction in headcount;
  • Approximately $4.9 million in lower fuel expense;
  • Approximately $3.2 million, or 37.9%, in lower general and administrative expenses;
  • Approximately $3.1 million in lower depreciation and amortization expenses; with,
  • The balance of $19.3 million related to reductions in all other direct operating expenses.

For the second quarter of 2016, the Company reported a net loss from continuing operations of $40.6 million, or a loss of $0.60 per diluted share. Special items in the second quarter totaled approximately $11.2 million and primarily included $8.4 million in legal and professional fees associated with the Company's Exchange Offer, $2.7 million for an asset impairment charge related to assets classified as held-for-sale, partially offset by a $1.7 million gain on the sale of our cost method investment in Underground Solutions, Inc. ("UGSI") and a $1.0 million gain on the change in fair value of the derivative warrant liability.  Additionally, special items included the loss on the sale of underutilized assets, severance-related charges, stock-based compensation expense, and the write off of a portion of the unamortized deferred financing costs associated with an amendment to the asset-based credit facility (the "ABL Credit Facility"). Excluding the impact of these special items, first-quarter loss from continuing operations was $29.4 million, or a loss of $0.43 per diluted share. This compares with a loss from continuing operations, adjusted for special items, of $26.4 million, or a loss of $0.95 per diluted share in the first quarter of 2016. The Company reported a loss from continuing operations, adjusted for special items, of $18.5 million, or a loss of $0.67 per diluted share in the second quarter of 2015.

Adjusted EBITDA from continuing operations for the second quarter was $0.3 million, a decrease of $1.2 million, or 79.5%, compared with adjusted EBITDA of $1.6 million in the first quarter of 2016.  Second quarter adjusted EBITDA margin from continuing operations was 0.9%, compared with an adjusted EBITDA margin of 3.3% in the first quarter of 2016.  The Company reported adjusted EBITDA from continuing operations of $12.3 million and an adjusted EBITDA margin of 13.3% in the second quarter of 2015.

YEAR-TO-DATE RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2016 ("YTD")

YTD revenue was $81.0 million, a decrease of $130.6 million, or 61.7%, from $211.5 million for the same period in 2015.  The decrease was attributable to lower overall drilling and completion activities coupled with continued pricing pressures in all divisions.

YTD net loss from continuing operations was $67.9 million, or a loss of $1.42 per diluted share, compared with a loss of $32.6 million, or a loss of $1.18 per diluted share, for the same period in 2015. Excluding special items, YTD adjusted net loss from continuing operations was $55.9 million, or a loss of $1.17 per diluted share, compared with adjusted net loss from continuing operations of $29.8 million, or a loss of $1.08 per diluted share in 2015.  The $12.0 million in YTD special items primarily included $8.4 million in legal and professional fees associated with the Company's Exchange Offer, $2.7 million for an asset impairment charge related to assets classified as held-for-sale, partially offset by a $1.7 million gain on the sale UGSI and a $1.0 million gain on the change in fair value of the derivative warrant liability.  Additionally, special items included the loss on the sale of underutilized assets, severance-related charges, stock-based compensation expense, and the write off of a portion of the unamortized deferred financing costs associated with an amendment to the ABL Credit Facility.

YTD adjusted EBITDA from continuing operations was $1.9 million, a decrease 93.9% when compared with the same period in 2015. Adjusted EBITDA margin for the 2016 YTD period was 2.3%, compared with 14.6% in 2015.

CASH FLOW AND LIQUIDITY

Net cash used in operating activities from continuing operations during six months ended June 30, 2016 was $12.6 million, with net cash capital expenditures from continuing operations of $3.9 million.  For the six months ended June 30, 2016, free cash flow was negative at $8.7 million, compared with positive free cash flow of $35.0 million in the same period in 2015.

On June 29, 2016, the Company amended its ABL Credit Facility with new terms that included a reduction in total commitments to $85 million, and a modification to the minimum EBITDA financial maintenance covenant which deferred the applicable periods for measurement and reduced the applicable amounts required to be achieved for each period.  In addition, the amendment changed the scheduled maturity date of the ABL Credit Facility from January 15, 2018 to December 31, 2016, but added a covenant requiring the Company to refinance the ABL Credit Facility in full on or before September 30, 2016. Total liquidity as of June 30, 2016, consisting almost entirely of available borrowings under the ABL Credit Facility, was $12.9 million.

As of June 30, 2016, total debt outstanding was $464.6 million, including $40.4 million of 2018 Notes, $335.7 million of 2021 Notes, $24.7 million under a Term Loan, $48.1 million under the ABL Facility, and $15.6 million in capital leases and notes payable. The Company made cumulative payments, net of proceeds received, during the six months ended June 30, 2016 of $53.7 million to reduce total debt outstanding under the ABL Credit Facility. The Company remains current with all payment obligations due on its outstanding debt and is in compliance with all related covenants.

About Nuverra

Nuverra Environmental Solutions 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. 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, including, without limitation, those that involve risks and uncertainties, including statements regarding any remaining transactions contemplated by the RSA or any benefits expected from the Company's debt restructuring. These statements relate to future plans, objectives, expectations and intentions and are for illustrative purposes only. These statements may be identified by the use of words such as "believe," "expect," "intend," "plan," "anticipate," "likely," "will," "could," "estimate," "may," "potential," "should," "would," and similar expressions. There can be no assurance that all or any portion of the aforementioned transactions will be consummated on the terms summarized herein or at all. 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 Securities and Exchange Commission and other factors discussed in the Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's views as of the date of the Form 8-K. The Company undertakes no obligation to update any of the forward-looking statements made in the Form 8-K, whether as a result of new information, future events, changes in expectations or otherwise.

602-903-7802
ir@nuverra.com

- Tables to Follow -

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands, except per share amounts)

(Unaudited)



Three Months Ended


Six Months Ended


June 30,


June 30,


2016


2015


2016


2015







Revenue:








 Non-rental revenue

$  31,369


$  85,530


$  75,395


$ 192,540

 Rental revenue

2,609


6,897


5,558


18,999

  Total revenue

33,978


92,427


80,953


211,539

Costs and expenses:








Direct operating expenses

30,283


71,574


68,900


159,573

General and administrative expenses

14,204


9,697


21,656


22,397

Depreciation and amortization

15,206


18,296


31,051


35,778

Impairment of long-lived assets

2,664


-


2,664


-

Other, net

-


429


-


1,112

  Total costs and expenses

62,357


99,996


124,271


218,860

Operating loss

(28,379)


(7,569)


(43,318)


(7,321)

Interest expense, net

(13,973)


(12,452)


(26,018)


(25,040)

Other income, net

2,771


400


2,929


721

Loss on extinguishment of debt

(284)


(1,011)


(674)


(1,011)

Loss from continuing operations before income taxes

(39,865)


(20,632)


(67,081)


(32,651)

Income tax (expense) benefit

(773)


(15)


(828)


9

Loss from continuing operations

(40,638)


(20,647)


(67,909)


(32,642)

Loss from discontinued operations, net of income taxes

(1,290)


(2,089)


(1,235)


(1,168)

Net loss attributable to common shareholders

$(41,928)


$(22,736)


$(69,144)


$ (33,810)









Net loss per common share attributable to common shareholders:
















Basic and diluted loss from continuing operations

$    (0.60)


$    (0.75)


$    (1.42)


$    (1.18)

Basic and diluted loss from discontinued operations

(0.02)


(0.08)


(0.03)


(0.04)

Net loss per basic and diluted share

$    (0.62)


$    (0.83)


$    (1.45)


$    (1.22)









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

67,699


27,679


47,803


27,546

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands)

(Unaudited)



June 30,


December 31,


2016


2015

Assets



(Note 1)

Cash and cash equivalents

$         303


$          39,309

Restricted cash

5,504


4,250

Accounts receivable, net 

19,996


42,188

Inventories

2,606


2,985

Prepaid expenses and other receivables

3,407


3,377

Other current assets

4,189


2,372

Assets held for sale

2,902


-

  Total current assets

38,907


94,481

Property, plant and equipment, net 

366,322


406,188

Equity investments

574


3,750

Intangibles, net

15,562


16,867

Other assets

573


1,333

Total assets

$   421,938


$        522,619

Liabilities and Shareholders' Deficit




Accounts payable

$      6,173


$            6,907

Accrued liabilities

21,476


29,843

Current contingent consideration

-


8,628

Current portion of long-term debt

56,427


499,709

Derivative warrant liability

6,201


-

 Total current liabilities

90,277


545,087

Deferred income taxes

317


270

Long-term debt

394,174


11,758

Long-term contingent consideration

8,500


-

Other long-term liabilities

3,723


3,775

Total liabilities

496,991


560,890

Commitments and contingencies




Shareholders' deficit:




Common stock

131


30

Additional paid-in capital

1,402,191


1,369,921

Treasury stock

(19,809)


(19,800)

Accumulated deficit

(1,457,566)


(1,388,422)

Total shareholders' deficit

(75,053)


(38,271)

Total liabilities and shareholders' deficit

$   421,938


$        522,619


Note 1: The condensed consolidated balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands)

(Unaudited)



Six Months Ended



June 30,



2016


2015

Cash flows from operating activities:





Net loss


$(69,144)


$(33,810)

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





  Income from discontinued operations, net of income taxes


-


(906)

  Loss on the sale of TFI


1,235


2,074

  Depreciation and amortization of intangible assets


31,051


35,778

  Amortization of debt issuance costs, net


2,587


2,438

  Stock-based compensation


656


1,516

  Impairment of long-lived assets


2,664


-

  Gain on sale of UGSI


(1,694)


-

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


727


(1,312)

  Bad debt expense


254


(208)

  Change in fair value of derivative warrant liability


(1,023)


-

  Loss on extinguishment of debt


674


1,011

  Deferred income taxes


48


1

  Other, net


(33)


316

  Changes in operating assets and liabilities:





  Accounts receivable


21,938


47,719

  Prepaid expenses and other receivables


(146)


(5,273)

  Accounts payable and accrued liabilities


118


(8,113)

  Other assets and liabilities, net


(2,506)


1,105

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


(12,594)


42,336

Net cash used in operating activities from discontinued operations


-


(708)

Net cash (used in) provided by operating activities


(12,594)


41,628

Cash flows from investing activities:





  Proceeds from the sale of TFI


-


78,897

  Proceeds from the sale of property, plant and equipment


5,995


3,448

  Purchases of property, plant and equipment


(2,133)


(10,807)

  Proceeds from the sale of UGSI


4,979


-

  Change in restricted cash


(1,254)


(4,250)

Net cash provided by investing activities from continuing operations


7,587


67,288

Net cash used in investing activities from discontinued operations


-


(181)

Net cash provided by investing activities


7,587


67,107

Cash flows from financing activities:





  Proceeds from revolving credit facility 


76,979


-

  Payments on revolving credit facility


(130,667)


(81,647)

  Proceeds from term loan


24,000


-

  Payments for deferred financing costs


(985)


-

  Payments on vehicle financing and other financing activities


(3,326)


(7,765)

Net cash used in financing activities of continuing operations


(33,999)


(89,412)

Net cash used in financing activities of discontinued operations


-


(105)

Net cash used in financing activities


(33,999)


(89,517)

Net (decrease) increase in cash and cash equivalents


(39,006)


19,218

Cash and cash equivalents - beginning of period


39,309


15,416

Cash and cash equivalents - end of period


303


34,634

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


-


-

Cash and cash equivalents of continuing operations - end of period


$      303


$  34,634

 

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), 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.


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










Three Months Ended


Six Months Ended


June 30,


June 30,


2016


2015


2016


2015

Loss from continuing operations

$(40,638)


$ (20,647)


$(67,909)


$ (32,642)

Depreciation and amortization

15,206


18,296


31,051


35,778

Interest expense, net

13,973


12,452


26,018


25,040

Income tax expense (benefit)

773


15


828


(9)

EBITDA

(10,686)


10,116


(10,012)


28,167









Adjustments:








Transaction-related costs, including earnout adjustments, net

2


177


(117)


(132)

Stock-based compensation

288


727


656


1,516

Change in fair value of derivative warrant liability

(1,023)


-


(1,023)


-

Legal and environmental costs, net

8,642


397


10,117


404

Impairment of long-lived assets

2,664


-


2,664


-

Restructuring, exit and other costs

59


513


(113)


1,335

Loss on extinguishment of debt

284


1,011


674


1,011

Gain on sale of UGSI

(1,694)


-


(1,694)


-

Loss (gain) on disposal of assets

1,784


(658)


727


(1,312)

Adjusted EBITDA from continuing operations

320


12,283


1,879


30,989

Adjusted EBITDA from discontinued operations

-


7


-


1,197

Total Adjusted EBITDA

$     320


$ 12,290


$  1,879


$ 32,186









Reconciliation of Loss from Discontinued Operations to EBITDA from Discontinued Operations and Adjusted EBITDA from Discontinued Operations:










 Three Months Ended 


 Six Months Ended 


June 30,


 June 30, 


2016


2015


2016


2015

Loss from discontinued operations

$  (1,290)


$   (2,089)


$  (1,235)


$   (1,168)

Income tax expense

-


-


-


265

EBITDA from discontinued operations

(1,290)


(2,089)


(1,235)


(903)

Adjustments:








Transaction-related costs

-


22


-


26

Loss on sale of TFI

1,290


2,074


1,235


2,074

Adjusted EBITDA from discontinued operations

$        -


$          7


$        -


$   1,197

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

NON-GAAP RECONCILIATIONS (continued)

 (In thousands)

(Unaudited)


Reconciliation of QTD Segment Performance to Adjusted EBITDA














Three Months Ended June 30, 2016


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$              18,952


$     7,688


$   7,338


$          -


$  33,978

Direct operating expenses


16,232


8,126


5,925


-


30,283

General and administrative expenses


1,695


339


973


11,197


14,204

Depreciation and amortization


7,792


3,426


3,919


69


15,206

Operating loss


(6,767)


(6,556)


(3,790)


(11,266)


(28,379)

Operating margin %


(35.7%)


(85.3%)


(51.6%)


NA


(83.5%)

Loss from continuing operations before income taxes


(6,818)


(6,669)


(3,825)


(22,553)


(39,865)












Loss from continuing operations


(6,818)


(6,669)


(3,825)


(23,326)


(40,638)

Depreciation and amortization


7,792


3,426


3,919


69


15,206

Interest expense, net


106


109


38


13,720


13,973

Income tax expense


-


-


-


773


773

EBITDA


$                1,080


$   (3,134)


$      132


$    (8,764)


$(10,686)












Adjustments, net


2,528


2,009


150


6,319


11,006

Adjusted EBITDA from continuing operations


$                3,608


$   (1,125)


$      282


$    (2,445)


$      320

Adjusted EBITDA margin %


19.0%


(14.6%)


3.8%


NA


0.9%























Three Months Ended June 30, 2015


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$              47,601


$   27,411


$  17,415


$          -


$  92,427

Direct operating expenses


36,107


21,996


13,471


-


71,574

General and administrative expenses


1,322


1,021


1,219


6,135


9,697

Depreciation and amortization


8,801


4,060


5,195


240


18,296

Operating income (loss)


1,371


295


(2,468)


(6,767)


(7,569)

Operating margin %


2.9%


1.1%


(14.2%)


NA


(8.2%)

Income (loss) from continuing operations before income taxes


1,805


(200)


(2,628)


(19,609)


(20,632)












Income (loss) from continuing operations


1,805


(206)


(2,632)


(19,614)


(20,647)

Depreciation and amortization


8,801


4,060


5,195


240


18,296

Interest expense, net


144


436


41


11,831


12,452

Income tax expense


-


6


4


5


15

EBITDA


$              10,750


$     4,296


$   2,608


$    (7,538)


$  10,116












Adjustments, net


14


371


(669)


2,451


2,167

Adjusted EBITDA from continuing operations


$              10,764


$     4,667


$   1,939


$    (5,087)


$  12,283

Adjusted EBITDA margin %


22.6%


17.0%


11.1%


NA


13.3%

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES 

NON-GAAP RECONCILIATIONS (continued)

 (In thousands)

(Unaudited)

Reconciliation of YTD Segment Performance to Adjusted EBITDA












Six Months Ended June 30, 2016


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$              43,857


$   20,465


$  16,631


$          -


$  80,953

Direct operating expenses


35,790


19,694


13,416


-


68,900

General and administrative expenses


3,547


1,529


1,893


14,687


21,656

Depreciation and amortization


15,871


7,309


7,733


138


31,051

Operating loss


(11,351)


(10,420)


(6,722)


(14,825)


(43,318)

Operating margin %


(25.9%)


(50.9%)


(40.4%)


NA


(53.5%)

Loss from continuing operations before income taxes


(11,470)


(10,600)


(6,751)


(38,260)


(67,081)












Loss from continuing operations


(11,470)


(10,600)


(6,751)


(39,088)


(67,909)

Depreciation and amortization


15,871


7,309


7,733


138


31,051

Interest expense, net


204


250


86


25,478


26,018

Income tax expense


-


-


-


828


828

EBITDA


$                4,605


$   (3,041)


$   1,068


$  (12,644)


$ (10,012)












Adjustments, net


2,713


1,726


(198)


7,650


11,891

Adjusted EBITDA from continuing operations


$                7,318


$   (1,315)


$      870


$    (4,994)


$    1,879

Adjusted EBITDA margin %


16.7%


(6.4%)


5.2%


NA


2.3%























Six Months Ended June 30, 2015


Rocky Mountain


Northeast


Southern


Corporate


Total

Revenue


$             117,011


$   54,724


$  39,804


$          -


$ 211,539

Direct operating expenses


84,532


43,492


31,549


-


159,573

General and administrative expenses


3,378


2,925


3,297


12,797


22,397

Depreciation and amortization


17,538


7,987


9,843


410


35,778

Operating income (loss)


11,563


197


(5,482)


(13,599)


(7,321)

Operating margin %


9.9%


0.4%


(13.8%)


NA


(3.5%)

Income (loss) from continuing operations before income taxes


11,902


(187)


(5,563)


(38,803)


(32,651)












Income (loss) from continuing operations


11,902


(193)


(5,567)


(38,784)


(32,642)

Depreciation and amortization


17,538


7,987


9,843


410


35,778

Interest expense, net


253


500


94


24,193


25,040

Income tax expense (benefit)


-


6


4


(19)


(9)

EBITDA


$              29,693


$     8,300


$   4,374


$  (14,200)


$  28,167












Adjustments, net


(575)


146


(131)


3,382


2,822

Adjusted EBITDA from continuing operations


$              29,118


$     8,446


$   4,243


$  (10,818)


$  30,989

Adjusted EBITDA margin %


24.9%


15.4%


10.7%


NA


14.6%

 

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 June 30, 2016


As Reported


Special Items


As Adjusted

Revenue

$        33,978


$           -



$        33,978

Direct operating expenses

30,283


(1,842)

[A]


28,441

General and administrative expenses

14,204


(8,933)

[B]


5,271

Total costs and expenses

62,357


(13,439)

[C]


48,918

Operating loss

(28,379)


13,439

[C]


(14,940)

Loss from continuing operations

(40,638)


11,215

[D]


(29,423)








Basic and diluted loss from continuing operations

$           (0.60)





$          (0.43)








Loss from continuing operations

$       (40,638)





$      (29,423)

Depreciation and amortization

15,206





15,206

Interest expense, net

13,973





13,973

Income tax expense

773





564

EBITDA and Adjusted EBITDA from continuing operations

$       (10,686)





$            320


Description of 2016 Special Items:

 [A] 

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

 [B] 

Primarily attributable to stock-based compensation and non-routine legal and professional fees incurred in connection with the execution of management's plan to restructure our indebtedness.

 [C] 

Primarily includes the aforementioned adjustments along with a long-lived asset impairment charge for assets classified as assets-held-for-sale of $2.7 million.

 [D] 

Primarily includes the aforementioned adjustments along with a gain of $1.0 million associated with the change in fair value of the derivative warrant liability, and a gain on the sale of Underground Solutions, Inc. of $1.7 million in the three months ended June 30, 2016. Additionally, our effective tax rate for the three months ended June 30, 2016 was 1.94% and has been applied to the special items accordingly.

 


Three Months Ended June 30, 2015


As Reported


Special Items


As Adjusted

Revenue

$        92,427


$         -



$       92,427

Direct operating expenses

71,574


658

[E]


72,232

General and administrative expenses

9,697


(1,208)

[F]


8,489

Total costs and expenses

99,996


(979)

[G]


99,017

Operating loss

(7,569)


979

[G]


(6,590)

Loss from continuing operations

(20,647)


2,169

[H]


(18,478)








Basic and diluted loss from continuing operations

$           (0.75)





$          (0.67)








Loss from continuing operations

$       (20,647)





$      (18,478)

Depreciation and amortization

18,296





18,296

Interest expense, net

12,452





12,452

Income tax expense

15





13

EBITDA and Adjusted EBITDA from continuing operations

$        10,116





$       12,283








Description of 2015 Special Items:

 [E] 

Special items include a gain on sale related to the disposal of certain transportation related assets.

 [F] 

Primarily attributable to stock-based compensation, non-routine litigation expenses and certain costs associated with an amendment to our ABL facility.

 [G] 

Primarily includes the aforementioned adjustments, and a charge of approximately $0.4 million associated with our restructuring initiative and other exit related costs from certain shale basins.

 [H] 

Primarily includes the aforementioned adjustments, along with a charge of $1.0 million in connection with a write-off of a portion of the unamortized deferred financing costs as a result of an amendment to our ABL Facility, and a charge related to a prior acquisition earnout reserve of $0.2 million.  Additionally, our effective tax rate for the three months ended June 30, 2015 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 Loss from Continuing Operations and to EBITDA and Adjusted EBITDA from Continuing Operations



Six Months Ended June 30, 2016


As Reported


Special Items


As Adjusted

Revenue

$        80,953


$            -



$       80,953

Direct operating expenses

68,900


(1,239)

[A]


67,661

General and administrative expenses

21,656


(10,159)

[B]


11,497

Total costs and expenses

124,271


(14,062)

[C]


110,209

Operating loss

(43,318)


14,062

[C]


(29,256)

Loss from continuing operations

(67,909)


12,034

[D]


(55,875)








Basic and diluted loss from continuing operations

$           (1.42)





$          (1.17)








Loss from continuing operations

$       (67,909)





$      (55,875)

Depreciation and amortization

31,051





31,051

Interest expense, net

26,018





26,018

Income tax expense

828





685

EBITDA and Adjusted EBITDA from continuing operations

$       (10,012)





$         1,879








Description of 2016 Special Items:

 [A] 

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

 [B] 

Primarily attributable to stock-based compensation and non-routine legal and professional fees incurred in connection with the execution of management's plan to restructure our indebtedness.

 [C] 

Primarily includes the aforementioned adjustments along with a long-lived asset impairment charge for assets classified as assets-held-for-sale of $2.7 million.

 [D] 

Primarily includes the aforementioned adjustments along with a charge of $0.7 million in connection with the write-off of a portion of unamortized deferred financing costs as a result of an amendment to the ABL Facility, a gain of $1.0 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 in the three months ended June 30, 2016. Additionally, our effective tax rate for the six months ended June 30, 2016 was 1.23% and has been applied to the special items accordingly.

 


Six Months Ended June 30, 2015


As Reported


Special Items


As Adjusted

Revenue

$      211,539


$          -



$     211,539

Direct operating expenses

159,573


1,312

[E]


160,885

General and administrative expenses

22,397


(2,143)

[F]


20,254

Total costs and expenses

218,860


(1,943)

[G]


216,917

Operating loss

(7,321)


1,943

[G]


(5,378)

Loss from continuing operations

(32,642)


2,822

[H]


(29,820)








Basic and diluted loss from continuing operations

$           (1.18)





$          (1.08)








Loss from continuing operations

$       (32,642)





$      (29,820)

Depreciation and amortization

35,778





35,778

Interest expense, net

25,040





25,040

Income tax benefit

(9)





(9)

EBITDA and Adjusted EBITDA from continuing operations

$        28,167





$       30,989


Description of 2015 Special Items:

 [E] 

Special items include a gain on sale related to the disposal of certain transportation related assets.

 [F] 

Primarily attributable to stock-based compensation, non-routine litigation expenses and certain costs associated with an amendment to our ABL Facility.

 [G] 

Primarily includes the aforementioned adjustments, and a charge of approximately $1.1 million associated with our restructuring initiative and other exit related costs from certain shale basins.

 [H] 

Primarily includes the aforementioned adjustments, along with a charge of $1.0 million in connection with a write-off of a portion of the unamortized deferred financing costs as a result of an amendment to our ABL Facility, a net reduction related to a prior acquisition earnout reserve of $0.1 million.  Additionally, our effective tax rate for the six months ended June 30, 2015 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 Free Cash Flow from Continuing Operations







Six Months Ended



June 30,



2016


2015

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


$(12,594)


$ 42,336

Less: net cash capital expenditures, [1]


3,862


(7,359)

Free Cash Flow


$  (8,732)


$ 34,977


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

 

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SOURCE Nuverra Environmental Solutions, Inc.