x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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26-0287117
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
|
¨
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Accelerated filer
|
x
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Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
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||
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||
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Item 2
.
|
||
|
|
|
•
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future financial performance and growth targets or expectations;
|
•
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market and industry trends and developments, including the current decline in oil and natural gas prices;
|
•
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the potential benefits of our completed and any future merger, acquisition, disposition, restructuring, and financing transactions;
|
•
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the expected timing for completion of the restructuring transactions described herein and in our other filings with the SEC; and
|
•
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the expected effect of the restructuring transactions.
|
•
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failure to complete all aspects of our restructuring transactions, including the note conversion, rights offering and implementation of the management incentive plan;
|
•
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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;
|
•
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risks associated with our indebtedness, including our ability to manage our liquidity needs and to comply with covenants under our credit facilities, including the indentures governing our notes;
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•
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risks associated with our capital structure, including our ability to refinance or restructure our indebtedness to access necessary funding under our existing or future credit facilities and to generate sufficient operating cash flow to meet our debt service obligations;
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•
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changes in customer drilling, completion and production activities and capital expenditure plans, including impacts due to low oil and/or natural gas prices or the economic or regulatory environment;
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•
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difficulties in identifying and completing acquisitions and divestitures, and differences in the type and availability of consideration or financing for such acquisitions and divestitures;
|
•
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difficulties in completing any refinancing or restructuring transactions;
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•
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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;
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•
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our ability to attract, motivate and retain key executives and qualified employees in key areas of our business;
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•
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fluctuations in prices, transportation costs and demand for commodities such as oil and natural gas;
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•
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risks associated with the operation, construction and development of saltwater disposal wells, solids and liquids treatment assets, landfills and pipelines, including access to additional locations and rights-of-way, unscheduled
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•
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risks associated with our ability to collect outstanding receivables as a result of liquidity constraints on our customers resulting from low oil and/or natural gas prices;
|
•
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the availability of less favorable credit and payment terms due to the downturn in our industry and our financial condition, including more stringent or costly payment terms from our vendors and additional requirements from sureties to collateralize our performance bonds with letters of credit, which may further constrain our liquidity and reduce availability under our revolving credit facility;
|
•
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risks associated with new technologies and the impact on our business;
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•
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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;
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•
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changes in economic conditions in the markets in which we operate or in the world generally, including as a result of political uncertainty;
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•
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reduced demand for our services due to regulatory or other influences related to extraction methods such as hydraulic fracturing, shifts in production among shale areas in which we operate or into shale areas in which we do not currently have operations or the loss of key customers;
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•
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the impact of changes in laws and regulation on waste management and disposal activities, including those impacting the delivery, storage, collection, transportation treatment and disposal of waste products, as well as the use or reuse of recycled or treated products or byproducts;
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•
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control of costs and expenses;
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•
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present and possible future claims, litigation or enforcement actions or investigations;
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•
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natural disasters, such as hurricanes, earthquakes and floods, or acts of terrorism, or extreme weather conditions, that may impact our corporate headquarters, assets, including wells or pipelines, distribution channels, or which otherwise disrupt our or our customers’ operations or the markets we serve;
|
•
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the threat or occurrence of international armed conflict;
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•
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the unknown future impact on our business from legislation and governmental rulemaking, including the Affordable Care Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules to be promulgated thereunder;
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•
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risks involving developments in environmental or other governmental laws and regulations in the markets in which we operate and our ability to effectively respond to those developments including laws and regulations relating to oil and natural gas extraction businesses, particularly relating to water usage, and the disposal, transportation and treatment of liquid and solid wastes; and
|
•
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other risks identified in this Quarterly Report or referenced from time to time in our filings with the United States Securities and Exchange Commission.
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Item 1.
|
Financial Statements.
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
|
|
|
(Note 1)
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
30
|
|
|
$
|
39,309
|
|
Restricted cash
|
4,450
|
|
|
4,250
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $3.5 and $3.5 million at March 31, 2016 and December 31, 2015, respectively
|
30,857
|
|
|
42,188
|
|
||
Inventories
|
2,715
|
|
|
2,985
|
|
||
Prepaid expenses and other receivables
|
4,011
|
|
|
3,377
|
|
||
Other current assets
|
5,744
|
|
|
2,372
|
|
||
Total current assets
|
47,807
|
|
|
94,481
|
|
||
Property, plant and equipment, net of accumulated depreciation of $219.2 and $209.1 million at March 31, 2016 and December 31, 2015, respectively
|
391,775
|
|
|
406,188
|
|
||
Equity investments
|
3,745
|
|
|
3,750
|
|
||
Intangibles, net
|
16,214
|
|
|
16,867
|
|
||
Other assets
|
572
|
|
|
1,333
|
|
||
Total assets
|
$
|
460,113
|
|
|
$
|
522,619
|
|
Liabilities and Shareholders' Deficit
|
|
|
|
||||
Accounts payable
|
$
|
7,269
|
|
|
$
|
6,907
|
|
Accrued liabilities
|
34,252
|
|
|
29,843
|
|
||
Current portion of contingent consideration
|
8,500
|
|
|
8,628
|
|
||
Current portion of long-term debt
|
463,164
|
|
|
499,709
|
|
||
Total current liabilities
|
513,185
|
|
|
545,087
|
|
||
Deferred income taxes
|
295
|
|
|
270
|
|
||
Long-term portion of debt
|
8,015
|
|
|
11,758
|
|
||
Other long-term liabilities
|
3,735
|
|
|
3,775
|
|
||
Total liabilities
|
525,230
|
|
|
560,890
|
|
||
Commitments and contingencies
|
|
|
|
||||
Shareholders' deficit:
|
|
|
|
||||
Common stock
|
30
|
|
|
30
|
|
||
Additional paid-in capital
|
1,370,298
|
|
|
1,369,921
|
|
||
Treasury stock
|
(19,807
|
)
|
|
(19,800
|
)
|
||
Accumulated deficit
|
(1,415,638
|
)
|
|
(1,388,422
|
)
|
||
Total shareholders' deficit
|
(65,117
|
)
|
|
(38,271
|
)
|
||
Total liabilities and shareholders' deficit
|
$
|
460,113
|
|
|
$
|
522,619
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Revenue:
|
|
|
|
||||
Non-rental revenue
|
$
|
44,026
|
|
|
$
|
107,010
|
|
Rental revenue
|
2,949
|
|
|
12,102
|
|
||
Total revenue
|
46,975
|
|
|
119,112
|
|
||
Costs and expenses:
|
|
|
|
||||
Direct operating expenses
|
38,617
|
|
|
87,999
|
|
||
General and administrative expenses
|
7,452
|
|
|
12,700
|
|
||
Depreciation and amortization
|
15,845
|
|
|
17,482
|
|
||
Other, net
|
—
|
|
|
683
|
|
||
Total costs and expenses
|
61,914
|
|
|
118,864
|
|
||
Operating (loss) income
|
(14,939
|
)
|
|
248
|
|
||
Interest expense, net
|
(12,045
|
)
|
|
(12,588
|
)
|
||
Other income, net
|
158
|
|
|
321
|
|
||
Loss on extinguishment of debt
|
(390
|
)
|
|
—
|
|
||
Loss from continuing operations before income taxes
|
(27,216
|
)
|
|
(12,019
|
)
|
||
Income tax (expense) benefit
|
(55
|
)
|
|
24
|
|
||
Loss from continuing operations
|
(27,271
|
)
|
|
(11,995
|
)
|
||
Income from discontinued operations, net of income taxes
|
55
|
|
|
921
|
|
||
Net loss attributable to common shareholders
|
$
|
(27,216
|
)
|
|
$
|
(11,074
|
)
|
|
|
|
|
||||
Net loss per common share attributable to common shareholders:
|
|
|
|
||||
Basic and diluted loss from continuing operations
|
$
|
(0.98
|
)
|
|
$
|
(0.44
|
)
|
Basic and diluted income from discontinued operations
|
—
|
|
|
0.03
|
|
||
Net loss per basic and diluted common share
|
$
|
(0.98
|
)
|
|
$
|
(0.41
|
)
|
|
|
|
|
||||
Weighted average shares outstanding used in computing net loss per basic and diluted common share
|
27,907
|
|
|
27,412
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(27,216
|
)
|
|
$
|
(11,074
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Income from discontinued operations, net of income taxes
|
—
|
|
|
(921
|
)
|
||
Gain on the sale of TFI
|
(55
|
)
|
|
—
|
|
||
Depreciation and amortization of intangible assets
|
15,845
|
|
|
17,482
|
|
||
Amortization of deferred financing costs and debt discounts, net
|
1,157
|
|
|
1,247
|
|
||
Stock-based compensation
|
368
|
|
|
789
|
|
||
Gain on disposal of property, plant and equipment
|
(1,057
|
)
|
|
(654
|
)
|
||
Bad debt expense
|
217
|
|
|
732
|
|
||
Loss on extinguishment of debt
|
390
|
|
|
—
|
|
||
Deferred income taxes
|
25
|
|
|
1
|
|
||
Other, net
|
(88
|
)
|
|
(418
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
11,114
|
|
|
21,688
|
|
||
Prepaid expenses and other receivables
|
(634
|
)
|
|
(1,273
|
)
|
||
Accounts payable and accrued liabilities
|
4,924
|
|
|
6,949
|
|
||
Other assets and liabilities, net
|
(2,425
|
)
|
|
202
|
|
||
Net cash provided by operating activities from continuing operations
|
2,565
|
|
|
34,750
|
|
||
Net cash provided by operating activities from discontinued operations
|
—
|
|
|
867
|
|
||
Net cash provided by operating activities
|
2,565
|
|
|
35,617
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from the sale of property, plant and equipment
|
1,449
|
|
|
1,968
|
|
||
Purchases of property, plant and equipment
|
(1,421
|
)
|
|
(6,163
|
)
|
||
Increase in restricted cash
|
(200
|
)
|
|
—
|
|
||
Net cash used in investing activities from continuing operations
|
(172
|
)
|
|
(4,195
|
)
|
||
Net cash used in investing activities from discontinued operations
|
—
|
|
|
(161
|
)
|
||
Net cash used in investing activities
|
(172
|
)
|
|
(4,356
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from revolving credit facility
|
12,409
|
|
|
—
|
|
||
Payments on revolving credit facility
|
(51,968
|
)
|
|
(7,000
|
)
|
||
Payments for deferred financing costs
|
(426
|
)
|
|
—
|
|
||
Payments on vehicle financing and other financing activities
|
(1,687
|
)
|
|
(1,436
|
)
|
||
Net cash used in financing activities from continuing operations
|
(41,672
|
)
|
|
(8,436
|
)
|
||
Net cash provided by financing activities from discontinued operations
|
—
|
|
|
38
|
|
||
Net cash used in financing activities
|
(41,672
|
)
|
|
(8,398
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(39,279
|
)
|
|
22,863
|
|
||
Cash and cash equivalents - beginning of period
|
39,309
|
|
|
15,416
|
|
||
Cash and cash equivalents - end of period
|
30
|
|
|
38,279
|
|
||
Less: cash and cash equivalents of discontinued operations - end of period
|
—
|
|
|
2,793
|
|
||
Cash and cash equivalents of continuing operations - end of period
|
$
|
30
|
|
|
$
|
35,486
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
928
|
|
|
$
|
949
|
|
Cash paid for taxes, net
|
2
|
|
|
94
|
|
•
|
Certain similar line items in the condensed consolidated statement of cash flows for the three months ended March 31, 2015 have been combined to conform to the current year presentation.
|
•
|
In June 2015, we purchased the remaining interest in Appalachian Water Services, LLC (“AWS”), previously a
51%
owned non-guarantor subsidiary, and have recast the tables in Note 16 to reflect AWS as a part of the Guarantor Subsidiaries for the
three months ended
March 31, 2015
.
|
•
|
As of January 1, 2016, and further discussed below under "Significant Accounting Policies," we retrospectively adopted, for all comparative periods presented, ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs
, and ASU 2015-15,
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
. As a result,
$7.9 million
and
$8.7 million
of unamortized debt issuance costs related to our 2018 Notes have been reclassified from “Other assets” to “Current portion of long-term debt” on the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015, respectively. Additionally, as the debt associated with our asset-based revolving credit facility is presented as short-term, the related debt issuance costs of
$2.1 million
and
$2.2 million
as of March 31, 2016 and December 31, 2015, respectively, have been reclassified from "Other assets" to "Other current assets" on the condensed consolidated balance sheets. Further, the total assets for the Corporate segment reported in Note 14 have been adjusted for this reclass.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Numerator:
|
|
|
|
||||
Loss from continuing operations
|
$
|
(27,271
|
)
|
|
$
|
(11,995
|
)
|
Income from discontinued operations
|
55
|
|
|
921
|
|
||
Net loss attributable to common shareholders
|
$
|
(27,216
|
)
|
|
$
|
(11,074
|
)
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Weighted average shares—basic
|
27,907
|
|
|
27,412
|
|
||
Common stock equivalents
|
—
|
|
|
—
|
|
||
Weighted average shares—diluted
|
27,907
|
|
|
27,412
|
|
||
|
|
|
|
||||
Basic and diluted loss per common share from continuing operations
|
$
|
(0.98
|
)
|
|
$
|
(0.44
|
)
|
Basic and diluted income per common share from discontinued operations
|
—
|
|
|
0.03
|
|
||
Net loss per basic and diluted common share
|
$
|
(0.98
|
)
|
|
$
|
(0.41
|
)
|
|
|
|
|
||||
Anti-dilutive stock-based awards excluded
|
706
|
|
|
879
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Remaining Useful Life (Years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Remaining Useful Life (Years)
|
||||||||||||
Customer relationships
|
$
|
11,731
|
|
|
$
|
(7,219
|
)
|
|
$
|
4,512
|
|
|
5.5
|
|
$
|
11,731
|
|
|
$
|
(6,865
|
)
|
|
$
|
4,866
|
|
|
6.0
|
Disposal permits
|
1,269
|
|
|
(492
|
)
|
|
777
|
|
|
4.9
|
|
1,269
|
|
|
(451
|
)
|
|
818
|
|
|
5.2
|
||||||
Customer contracts
|
17,352
|
|
|
(6,427
|
)
|
|
10,925
|
|
|
10.5
|
|
17,352
|
|
|
(6,169
|
)
|
|
11,183
|
|
|
11.0
|
||||||
|
$
|
30,352
|
|
|
$
|
(14,138
|
)
|
|
$
|
16,214
|
|
|
8.9
|
|
$
|
30,352
|
|
|
$
|
(13,485
|
)
|
|
$
|
16,867
|
|
|
9.3
|
•
|
Level 1 — Observable inputs such as quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
|
•
|
Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
•
|
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
|
Fair Value
|
||
As of March 31, 2016
|
|
||
Assets - Cost method investment
|
$
|
3,169
|
|
Liabilities - Contingent consideration
|
8,500
|
|
|
|
|
||
As of December 31, 2015
|
|
||
Assets - Cost method investment
|
$
|
3,169
|
|
Liabilities - Contingent consideration
|
8,628
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Balance at beginning of period
|
$
|
8,628
|
|
|
$
|
9,824
|
|
Cash payments
|
—
|
|
|
(909
|
)
|
||
Changes in fair value of contingent consideration, net
|
(128
|
)
|
|
(287
|
)
|
||
Current portion of contingent consideration
|
$
|
8,500
|
|
|
$
|
8,628
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Accrued payroll and employee benefits
|
$
|
2,392
|
|
|
$
|
5,839
|
|
Accrued insurance
|
6,000
|
|
|
5,896
|
|
||
Accrued legal and environmental costs
|
1,714
|
|
|
1,531
|
|
||
Accrued taxes
|
1,200
|
|
|
1,514
|
|
||
Accrued interest
|
18,365
|
|
|
8,516
|
|
||
Accrued operating costs
|
2,192
|
|
|
4,233
|
|
||
Accrued other
|
2,389
|
|
|
2,314
|
|
||
Total accrued liabilities
|
$
|
34,252
|
|
|
$
|
29,843
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Interest Rate
|
|
Maturity Date
|
|
Unamortized Deferred Financing Costs (g)
|
|
Fair Value of Debt (f)
|
|
Carrying Value of Debt
|
|
Carrying Value of Debt
|
||||||||
ABL Facility (a)
|
2.94%
|
|
Jan. 2018
|
|
$
|
2,109
|
|
|
$
|
62,273
|
|
|
$
|
62,273
|
|
|
$
|
101,832
|
|
2018 Notes (b)
|
9.875%
|
|
Apr. 2018
|
|
7,862
|
|
|
96,000
|
|
|
400,000
|
|
|
400,000
|
|
||||
Vehicle financings (c)
|
1.52%
|
|
Various
|
|
—
|
|
|
11,114
|
|
|
11,114
|
|
|
12,303
|
|
||||
Note payable (d)
|
4.25%
|
|
Apr. 2019
|
|
—
|
|
|
6,063
|
|
|
6,063
|
|
|
6,492
|
|
||||
Total debt
|
|
|
|
|
$
|
9,971
|
|
|
$
|
175,450
|
|
|
479,450
|
|
|
520,627
|
|
||
Original issue discount (e)
|
|
|
|
|
|
|
|
|
(578
|
)
|
|
(639
|
)
|
||||||
Original issue premium (e)
|
|
|
|
|
|
|
|
|
169
|
|
|
187
|
|
||||||
Deferred financing costs presented with debt (g)
|
|
|
|
|
|
|
|
(7,862
|
)
|
|
(8,708
|
)
|
|||||||
Total debt, net
|
|
|
|
|
|
|
|
|
471,179
|
|
|
511,467
|
|
||||||
Less: current portion (h)
|
|
|
|
|
|
|
|
|
(463,164
|
)
|
|
(499,709
|
)
|
||||||
Long-term portion of debt
|
|
|
|
|
|
|
|
|
$
|
8,015
|
|
|
$
|
11,758
|
|
(a)
|
The interest rate presented represents the interest rate on the
$100.0 million
ABL Facility at
March 31, 2016
.
|
(b)
|
The interest rate presented represents the coupon rate on our outstanding
$400.0 million
aggregate principal amounts of
9.875%
Senior Notes due 2018 (the “2018 Notes”), excluding the effects of deferred financing costs, original issue discounts and original issue premiums. Including the impact of these items, the effective interest rate on the 2018 Notes is approximately
11.0%
. Interest payments are due semi-annually on April 15 and October 15 of each year.
|
(c)
|
Vehicle financings consist of capital lease arrangements related to fleet purchases with a weighted-average annual interest rate of approximately
1.52%
and which mature in varying installments between
2016
and
2020
. Capital lease obligations were
$11.1 million
and
$12.3 million
, respectively, at
March 31, 2016
and
December 31, 2015
, respectively.
|
(d)
|
During the three months ended June 30, 2015, we settled our
$11.0 million
financing obligation to acquire the remaining
49%
interest in AWS from the non-controlling interest holder with a
$4.0 million
cash payment and a
$7.4 million
note payable with principal and interest due in equal quarterly installments through April 2019.
|
(e)
|
The issuance discount represents the unamortized difference between the
$250.0 million
aggregate principal amount of the 2018 Notes issued in April 2012 and the proceeds received upon issuance (excluding interest and fees). The issuance premium represents the unamortized difference between the proceeds received in connection with the November 2012 issuance of the 2018 Notes (excluding interest and fees) and the
$150.0 million
aggregate principal amount thereunder.
|
(f)
|
The estimated fair value of our 2018 Notes is based on quoted market prices as of
March 31, 2016
. Our ABL Facility and vehicle financings bear interest at rates commensurate with market rates and therefore their respective carrying values approximate fair value.
|
(g)
|
As discussed previously in Note 1, upon retrospective adoption of ASU 2015-03, we have reclassified the deferred financing costs associated with the 2018 Notes to be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability as of
March 31, 2016
and
December 31, 2015
. In accordance with ASU 2015-15, the deferred financing costs related to the ABL Facility continue to be presented as an asset, and are included in "Other current assets" on the condensed consolidated balance sheets as of
March 31, 2016
and
December 31, 2015
.
|
(h)
|
As a result of the probability of breaching one of the financial covenants if we are not successful at restructuring our debt (see "Restructuring Support Agreement" later in this section), the carrying value of the ABL Facility and the 2018 Notes was reclassified to current liabilities in the consolidated balance sheet as of March 31, 2016 and December 31, 2015.
|
•
|
Reduces the maximum revolver commitments from
$125.0 million
to
$100.0 million
;
|
•
|
Replaces the leverage ratio financial maintenance covenant with a new minimum EBITDA financial maintenance covenant that will be tested monthly;
|
•
|
Amends the definition of “EBITDA” for purposes of the financial maintenance covenant to provide allowances for certain unusual or non-recurring fees, costs and expenses, with testing monthly beginning in April 2016;
|
•
|
Amends the definition of “Borrowing Base” (i) to set the eligible equipment advance rates based on net book value at
60%
and on Net Orderly Liquidation Value (as defined in the ABL Facility) at
80%
and (ii) to cap Borrowing Base availability attributable to eligible equipment at
75%
;
|
•
|
Increases the default rate upon the occurrence and continuation of an event of default from
2%
to
4%
;
|
•
|
Increases the applicable margin on LIBOR Rate and Base Rate Loans (each as defined in the ABL Facility) and the unused line fee;
|
•
|
Eliminates our ability to voluntarily reduce the commitments without termination of the ABL Facility;
|
•
|
Requires us to apply proceeds from the Restructuring transactions and related agreements to pay down the ABL Facility;
|
•
|
Amends the definition of “Permitted Disposition” to permit the sale of our equity investment in Underground Solutions, Inc., discussed further in Note 13, and to expand the permitted disposition general basket (which excludes the sale of machinery and equipment in the ordinary course of business) from
$5.0 million
to
$7.5 million
;
|
•
|
Applies a Permitted Disposition Reserve of
50%
against our availability for net cash proceeds in excess of
$7.5 million
made on or after March 10, 2016 for sales specifically related to the Permitted Disposition general basket; and
|
•
|
Amends certain definitions in connection with the Restructuring transactions, including “Change of Control”, “Permitted Indebtedness”, and “Permitted Liens”.
|
|
Three Months Ended
|
|
Three Months Ended
|
||||
|
March 31, 2016
|
|
March 31, 2015
|
||||
Severance and termination benefits
|
$
|
—
|
|
|
$
|
240
|
|
Asset impairment charge
|
—
|
|
|
—
|
|
||
Contract termination costs and exit costs
|
—
|
|
|
443
|
|
||
Total restructuring and exit costs
|
$
|
—
|
|
|
$
|
683
|
|
|
Employee Termination Costs (a)
|
|
Lease Exit Costs (b)
|
|
Other Exit Costs (c)
|
|
Total
|
||||||||
Restructuring and exit costs accrued at December 31, 2015
|
$
|
—
|
|
|
$
|
180
|
|
|
$
|
—
|
|
|
$
|
180
|
|
Restructuring and exit-related costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Cash payments
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
||||
Restructuring and exit costs accrued at March 31, 2016
|
$
|
—
|
|
|
$
|
168
|
|
|
$
|
—
|
|
|
$
|
168
|
|
(a)
|
Employee termination costs consist primarily of severance and related costs.
|
(b)
|
Lease exit costs consist primarily of costs that will continue to be incurred under non-cancellable operating leases for their remaining term without benefit to us.
|
(c)
|
Other exit costs include costs related to the movement of vehicles and rental fleet in connection with the exit from certain shale areas.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Current income tax (expense) benefit
|
$
|
(30
|
)
|
|
$
|
25
|
|
Deferred income tax expense
|
(25
|
)
|
|
(1
|
)
|
||
Total income tax (expense) benefit
|
$
|
(55
|
)
|
|
$
|
24
|
|
|
|
Three Months Ended
|
||||
|
|
March 31,
|
||||
|
|
2016
|
|
2015
|
||
Stock option grants
|
|
—
|
|
|
703
|
|
Restricted stock grants
|
|
—
|
|
|
—
|
|
Restricted stock unit grants
|
|
1
|
|
|
151
|
|
Total grants under the 2009 Plan
|
|
1
|
|
|
854
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Stock options
|
|
$
|
84
|
|
|
$
|
148
|
|
Restricted stock
|
|
85
|
|
|
101
|
|
||
Restricted stock units
|
|
199
|
|
|
540
|
|
||
Total stock-based compensation expense
|
|
$
|
368
|
|
|
$
|
789
|
|
|
Rocky Mountain
|
|
Northeast
|
|
Southern
|
|
Corporate/ Other
|
|
Total
|
||||||||||
Three months ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
24,905
|
|
|
$
|
12,777
|
|
|
$
|
9,293
|
|
|
$
|
—
|
|
|
$
|
46,975
|
|
Direct operating expenses
|
19,558
|
|
|
11,568
|
|
|
7,491
|
|
|
—
|
|
|
38,617
|
|
|||||
General and administrative expenses
|
1,852
|
|
|
1,190
|
|
|
920
|
|
|
3,490
|
|
|
7,452
|
|
|||||
Depreciation and amortization
|
8,079
|
|
|
3,883
|
|
|
3,814
|
|
|
69
|
|
|
15,845
|
|
|||||
Operating loss
|
(4,584
|
)
|
|
(3,864
|
)
|
|
(2,932
|
)
|
|
(3,559
|
)
|
|
(14,939
|
)
|
|||||
Loss from continuing operations before income taxes
|
(4,652
|
)
|
|
(3,931
|
)
|
|
(2,926
|
)
|
|
(15,707
|
)
|
|
(27,216
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
As of March 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets (a)
|
246,530
|
|
|
72,916
|
|
|
123,028
|
|
|
17,639
|
|
|
460,113
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Three months ended March 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
69,410
|
|
|
27,313
|
|
|
22,389
|
|
|
—
|
|
|
119,112
|
|
|||||
Direct operating expenses
|
48,425
|
|
|
21,496
|
|
|
18,078
|
|
|
—
|
|
|
87,999
|
|
|||||
General and administrative expenses
|
2,056
|
|
|
1,904
|
|
|
2,078
|
|
|
6,662
|
|
|
12,700
|
|
|||||
Depreciation and amortization
|
8,737
|
|
|
3,927
|
|
|
4,648
|
|
|
170
|
|
|
17,482
|
|
|||||
Operating income (loss)
|
10,192
|
|
|
(98
|
)
|
|
(3,014
|
)
|
|
(6,832
|
)
|
|
248
|
|
|||||
Income (loss) from continuing operations before income taxes
|
10,097
|
|
|
13
|
|
|
(2,935
|
)
|
|
(19,194
|
)
|
|
(12,019
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
As of December 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets (a)
|
263,871
|
|
|
76,472
|
|
|
128,482
|
|
|
53,794
|
|
|
522,619
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Revenue
|
$
|
—
|
|
|
$
|
17,497
|
|
|
|
|
|
||||
Income from discontinued operations before income taxes
|
$
|
—
|
|
|
$
|
1,186
|
|
Income tax expense
|
—
|
|
|
(265
|
)
|
||
Income from discontinued operations - before sale
|
$
|
—
|
|
|
$
|
921
|
|
Income on sale of TFI
|
55
|
|
|
—
|
|
||
Income from discontinued operations
|
$
|
55
|
|
|
$
|
921
|
|
•
|
in connection with any sale, disposition or transfer of all or substantially all of the assets to a person that is not the Company or a subsidiary guarantor;
|
•
|
in connection with any sale, disposition or transfer of all of the capital stock of that subsidiary guarantor to a person that is not the Company or a subsidiary guarantor;
|
•
|
if we designate any restricted subsidiary that is a subsidiary guarantor to be an unrestricted subsidiary; or
|
•
|
upon legal defeasance or the discharge of our obligations under the Indenture.
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||
ASSETS
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
808
|
|
|
$
|
(778
|
)
|
|
$
|
—
|
|
|
$
|
30
|
|
Restricted cash
|
4,250
|
|
|
200
|
|
|
—
|
|
|
4,450
|
|
||||
Accounts receivable, net
|
—
|
|
|
30,857
|
|
|
—
|
|
|
30,857
|
|
||||
Deferred income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other current assets
|
7,275
|
|
|
5,195
|
|
|
—
|
|
|
12,470
|
|
||||
Total current assets
|
12,333
|
|
|
35,474
|
|
|
—
|
|
|
47,807
|
|
||||
Property, plant and equipment, net
|
2,546
|
|
|
389,229
|
|
|
|
|
|
391,775
|
|
||||
Equity investments
|
32,033
|
|
|
576
|
|
|
(28,864
|
)
|
|
3,745
|
|
||||
Intangible assets, net
|
—
|
|
|
16,214
|
|
|
—
|
|
|
16,214
|
|
||||
Other
|
405,619
|
|
|
80,677
|
|
|
(485,724
|
)
|
|
572
|
|
||||
Total assets
|
$
|
452,531
|
|
|
$
|
522,170
|
|
|
$
|
(514,588
|
)
|
|
$
|
460,113
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
||||||||
Accounts payable
|
$
|
1,610
|
|
|
$
|
5,659
|
|
|
$
|
—
|
|
|
$
|
7,269
|
|
Accrued liabilities
|
23,048
|
|
|
11,204
|
|
|
—
|
|
|
34,252
|
|
||||
Current portion of contingent consideration
|
—
|
|
|
8,500
|
|
|
—
|
|
|
8,500
|
|
||||
Current portion of long-term debt
|
454,003
|
|
|
9,161
|
|
|
—
|
|
|
463,164
|
|
||||
Total current liabilities
|
478,661
|
|
|
34,524
|
|
|
—
|
|
|
513,185
|
|
||||
Deferred income taxes
|
(32,473
|
)
|
|
32,768
|
|
|
—
|
|
|
295
|
|
||||
Long-term portion of debt
|
—
|
|
|
8,015
|
|
|
—
|
|
|
8,015
|
|
||||
Other long-term liabilities
|
71,460
|
|
|
417,999
|
|
|
(485,724
|
)
|
|
3,735
|
|
||||
Total shareholders' deficit
|
(65,117
|
)
|
|
28,864
|
|
|
(28,864
|
)
|
|
(65,117
|
)
|
||||
Total liabilities and shareholders' deficit
|
$
|
452,531
|
|
|
$
|
522,170
|
|
|
$
|
(514,588
|
)
|
|
$
|
460,113
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||
ASSETS
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
40,660
|
|
|
$
|
(1,351
|
)
|
|
$
|
—
|
|
|
$
|
39,309
|
|
Restricted cash
|
4,250
|
|
|
—
|
|
|
—
|
|
|
4,250
|
|
||||
Accounts receivable, net
|
—
|
|
|
42,188
|
|
|
—
|
|
|
42,188
|
|
||||
Other current assets
|
2,654
|
|
|
6,080
|
|
|
—
|
|
|
8,734
|
|
||||
Total current assets
|
47,564
|
|
|
46,917
|
|
|
—
|
|
|
94,481
|
|
||||
Property, plant and equipment, net
|
2,609
|
|
|
403,579
|
|
|
—
|
|
|
406,188
|
|
||||
Equity investments
|
43,542
|
|
|
581
|
|
|
(40,373
|
)
|
|
3,750
|
|
||||
Intangible assets, net
|
—
|
|
|
16,867
|
|
|
—
|
|
|
16,867
|
|
||||
Other
|
404,620
|
|
|
72,137
|
|
|
(475,424
|
)
|
|
1,333
|
|
||||
Total assets
|
$
|
498,335
|
|
|
$
|
540,081
|
|
|
$
|
(515,797
|
)
|
|
$
|
522,619
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
||||||||
Accounts payable
|
$
|
172
|
|
|
$
|
6,735
|
|
|
$
|
—
|
|
|
$
|
6,907
|
|
Accrued liabilities
|
13,824
|
|
|
16,019
|
|
|
—
|
|
|
29,843
|
|
||||
Current portion of contingent consideration
|
—
|
|
|
8,628
|
|
|
—
|
|
|
8,628
|
|
||||
Current portion of long-term debt
|
492,671
|
|
|
7,038
|
|
|
—
|
|
|
499,709
|
|
||||
Total current liabilities
|
506,667
|
|
|
38,420
|
|
|
—
|
|
|
545,087
|
|
||||
Deferred income taxes
|
(32,488
|
)
|
|
32,758
|
|
|
—
|
|
|
270
|
|
||||
Long-term portion of debt
|
—
|
|
|
11,758
|
|
|
—
|
|
|
11,758
|
|
||||
Other long-term liabilities
|
62,427
|
|
|
416,772
|
|
|
(475,424
|
)
|
|
3,775
|
|
||||
Total shareholders' deficit
|
(38,271
|
)
|
|
40,373
|
|
|
(40,373
|
)
|
|
(38,271
|
)
|
||||
Total liabilities and shareholders' deficit
|
$
|
498,335
|
|
|
$
|
540,081
|
|
|
$
|
(515,797
|
)
|
|
$
|
522,619
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||
Revenue
|
$
|
—
|
|
|
$
|
46,975
|
|
|
$
|
—
|
|
|
$
|
46,975
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Direct operating expenses
|
—
|
|
|
38,617
|
|
|
—
|
|
|
38,617
|
|
||||
General and administrative expenses
|
3,490
|
|
|
3,962
|
|
|
—
|
|
|
7,452
|
|
||||
Depreciation and amortization
|
69
|
|
|
15,776
|
|
|
—
|
|
|
15,845
|
|
||||
Total costs and expenses
|
3,559
|
|
|
58,355
|
|
|
—
|
|
|
61,914
|
|
||||
Operating loss
|
(3,559
|
)
|
|
(11,380
|
)
|
|
—
|
|
|
(14,939
|
)
|
||||
Interest expense, net
|
(11,758
|
)
|
|
(287
|
)
|
|
—
|
|
|
(12,045
|
)
|
||||
Other income, net
|
—
|
|
|
163
|
|
|
—
|
|
|
163
|
|
||||
Loss from equity investments
|
(11,532
|
)
|
|
(5
|
)
|
|
11,532
|
|
|
(5
|
)
|
||||
Loss on extinguishment of debt
|
(390
|
)
|
|
—
|
|
|
—
|
|
|
(390
|
)
|
||||
Loss from continuing operations before income taxes
|
(27,239
|
)
|
|
(11,509
|
)
|
|
11,532
|
|
|
(27,216
|
)
|
||||
Income tax expense
|
(32
|
)
|
|
(23
|
)
|
|
—
|
|
|
(55
|
)
|
||||
Loss from continuing operations
|
(27,271
|
)
|
|
(11,532
|
)
|
|
11,532
|
|
|
(27,271
|
)
|
||||
Income from discontinued operations, net of income taxes
|
55
|
|
|
—
|
|
|
—
|
|
|
55
|
|
||||
Net loss attributable to common shareholders
|
$
|
(27,216
|
)
|
|
$
|
(11,532
|
)
|
|
$
|
11,532
|
|
|
$
|
(27,216
|
)
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||
Revenue
|
$
|
—
|
|
|
$
|
119,112
|
|
|
$
|
—
|
|
|
$
|
119,112
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Direct operating expenses
|
—
|
|
|
87,999
|
|
|
—
|
|
|
87,999
|
|
||||
General and administrative expenses
|
6,662
|
|
|
6,038
|
|
|
—
|
|
|
12,700
|
|
||||
Depreciation and amortization
|
170
|
|
|
17,312
|
|
|
—
|
|
|
17,482
|
|
||||
Other, net
|
—
|
|
|
683
|
|
|
—
|
|
|
683
|
|
||||
Total costs and expenses
|
6,832
|
|
|
112,032
|
|
|
—
|
|
|
118,864
|
|
||||
Operating (loss) income
|
(6,832
|
)
|
|
7,080
|
|
|
—
|
|
|
248
|
|
||||
Interest expense, net
|
(12,362
|
)
|
|
(226
|
)
|
|
—
|
|
|
(12,588
|
)
|
||||
Other income, net
|
—
|
|
|
342
|
|
|
—
|
|
|
342
|
|
||||
Income (loss) from equity investments
|
8,083
|
|
|
(21
|
)
|
|
(8,083
|
)
|
|
(21
|
)
|
||||
(Loss) income from continuing operations before income taxes
|
(11,111
|
)
|
|
7,175
|
|
|
(8,083
|
)
|
|
(12,019
|
)
|
||||
Income tax benefit (expense)
|
37
|
|
|
(13
|
)
|
|
—
|
|
|
24
|
|
||||
(Loss) income from continuing operations
|
(11,074
|
)
|
|
7,162
|
|
|
(8,083
|
)
|
|
(11,995
|
)
|
||||
Income from discontinued operations, net of income taxes
|
—
|
|
|
921
|
|
|
—
|
|
|
921
|
|
||||
Net (loss) income attributable to common shareholders
|
$
|
(11,074
|
)
|
|
$
|
8,083
|
|
|
$
|
(8,083
|
)
|
|
$
|
(11,074
|
)
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Consolidated
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net cash provided by operating activities from continuing operations
|
$
|
115
|
|
|
$
|
2,450
|
|
|
$
|
2,565
|
|
Net cash used in operating activities from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by operating activities
|
115
|
|
|
2,450
|
|
|
2,565
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from the sale of property and equipment
|
25
|
|
|
1,424
|
|
|
1,449
|
|
|||
Purchase of property, plant and equipment
|
—
|
|
|
(1,421
|
)
|
|
(1,421
|
)
|
|||
Increase in restricted cash
|
—
|
|
|
(200
|
)
|
|
(200
|
)
|
|||
Net cash provided by (used in) investing activities from continuing operations
|
25
|
|
|
(197
|
)
|
|
(172
|
)
|
|||
Net cash used in investing activities from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used in) investing activities
|
25
|
|
|
(197
|
)
|
|
(172
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from revolving credit facility
|
12,409
|
|
|
—
|
|
|
12,409
|
|
|||
Payments on revolving credit facility
|
(51,968
|
)
|
|
—
|
|
|
(51,968
|
)
|
|||
Payments for deferred financing costs
|
(426
|
)
|
|
—
|
|
|
(426
|
)
|
|||
Payments on vehicle financing and other financing activities
|
(7
|
)
|
|
(1,680
|
)
|
|
(1,687
|
)
|
|||
Net cash used in financing activities from continuing operations
|
(39,992
|
)
|
|
(1,680
|
)
|
|
(41,672
|
)
|
|||
Net cash used in financing activities from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net cash used in financing activities
|
(39,992
|
)
|
|
(1,680
|
)
|
|
(41,672
|
)
|
|||
Net (decrease) increase in cash
|
(39,852
|
)
|
|
573
|
|
|
(39,279
|
)
|
|||
Cash and cash equivalents - beginning of period
|
40,660
|
|
|
(1,351
|
)
|
|
39,309
|
|
|||
Cash and cash equivalents - end of period
|
808
|
|
|
(778
|
)
|
|
30
|
|
|||
Less: cash and cash equivalents of discontinued operations - end of period
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cash and cash equivalents of continuing operations - end of period
|
$
|
808
|
|
|
$
|
(778
|
)
|
|
$
|
30
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Consolidated
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net cash provided by operating activities from continuing operations
|
$
|
27,658
|
|
|
$
|
7,092
|
|
|
$
|
34,750
|
|
Net cash provided by operating activities from discontinued operations
|
—
|
|
|
867
|
|
|
867
|
|
|||
Net cash provided by operating activities
|
27,658
|
|
|
7,959
|
|
|
35,617
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from the sale of property and equipment
|
255
|
|
|
1,713
|
|
|
1,968
|
|
|||
Purchase of property, plant and equipment
|
—
|
|
|
(6,163
|
)
|
|
(6,163
|
)
|
|||
Net cash provided by (used in) investing activities from continuing operations
|
255
|
|
|
(4,450
|
)
|
|
(4,195
|
)
|
|||
Net cash used in investing activities from discontinued operations
|
—
|
|
|
(161
|
)
|
|
(161
|
)
|
|||
Net cash provided by (used in) investing activities
|
255
|
|
|
(4,611
|
)
|
|
(4,356
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|||||
Payments on revolving credit facility
|
(7,000
|
)
|
|
—
|
|
|
(7,000
|
)
|
|||
Payments on vehicle financing and other financing activities
|
(75
|
)
|
|
(1,361
|
)
|
|
(1,436
|
)
|
|||
Net cash used in financing activities from continuing operations
|
(7,075
|
)
|
|
(1,361
|
)
|
|
(8,436
|
)
|
|||
Net cash provided by financing activities from discontinued operations
|
—
|
|
|
38
|
|
|
38
|
|
|||
Net cash used in financing activities
|
(7,075
|
)
|
|
(1,323
|
)
|
|
(8,398
|
)
|
|||
Net increase in cash
|
20,838
|
|
|
2,025
|
|
|
22,863
|
|
|||
Cash and cash equivalents - beginning of period
|
13,801
|
|
|
1,615
|
|
|
15,416
|
|
|||
Cash and cash equivalents - end of period
|
34,639
|
|
|
3,640
|
|
|
38,279
|
|
|||
Less: cash and cash equivalents of discontinued operations - end of period
|
|
|
|
(2,793
|
)
|
|
(2,793
|
)
|
|||
Cash and cash equivalents of continuing operations - end of period
|
$
|
34,639
|
|
|
$
|
847
|
|
|
$
|
35,486
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Revenue - from predominantly oil shale areas (a)
|
$
|
28,469
|
|
|
$
|
87,437
|
|
Revenue - from predominantly gas shale areas (b)
|
18,506
|
|
|
31,675
|
|
||
Total revenue
|
$
|
46,975
|
|
|
$
|
119,112
|
|
|
|
|
|
||||
Loss from continuing operations before income taxes
|
$
|
(27,216
|
)
|
|
$
|
(12,019
|
)
|
Loss from continuing operations
|
(27,271
|
)
|
|
(11,995
|
)
|
||
EBITDA (c, d)
|
674
|
|
|
18,051
|
|
(a)
|
Represents revenues that are derived from predominantly oil-rich areas consisting of the Bakken, Eagle Ford and Permian Basin Shale areas. Note that the Utica Shale area was previously included in the oil shale areas until the three months ended September 30, 2015 when it was reclassified as a gas shale area.
|
(b)
|
Represents revenues that are derived from predominantly gas-rich areas consisting of the Marcellus, Utica and Haynesville Shale areas. Note that the Utica Shale area was previously included in the oil shale areas until the three months ended September 30, 2015 when it was reclassified as a gas shale area.
|
(c)
|
Defined as consolidated net income (loss) from continuing operations before net interest expense, income taxes and depreciation and amortization. EBITDA is not a recognized measure under generally accepted accounting principles in the United States (or “GAAP”). See the reconciliation between loss from continuing operations and EBITDA under “Liquidity and Capital Resources—EBITDA”.
|
(d)
|
The Company's debt covenants referred to in Note 8 of the Notes to the Condensed Consolidated Financial Statements are based on EBITDA adjusted for certain items as defined.
|
|
Three Months Ended
|
|
Percent of Revenue
|
|
|
|
|
|||||||||||||
|
March 31,
|
|
March 31,
|
|
Increase (Decrease)
|
|||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016 vs 2015
|
|||||||||||
Non-rental revenue
|
$
|
44,026
|
|
|
$
|
107,010
|
|
|
93.7
|
%
|
|
89.8
|
%
|
|
$
|
(62,984
|
)
|
|
(58.9
|
)%
|
Rental revenue
|
2,949
|
|
|
12,102
|
|
|
6.3
|
%
|
|
10.2
|
%
|
|
(9,153
|
)
|
|
(75.6
|
)%
|
|||
Total revenue
|
46,975
|
|
|
119,112
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
(72,137
|
)
|
|
(60.6
|
)%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Direct operating expenses
|
38,617
|
|
|
87,999
|
|
|
82.2
|
%
|
|
73.9
|
%
|
|
(49,382
|
)
|
|
(56.1
|
)%
|
|||
General and administrative expenses
|
7,452
|
|
|
12,700
|
|
|
15.9
|
%
|
|
10.7
|
%
|
|
(5,248
|
)
|
|
(41.3
|
)%
|
|||
Depreciation and amortization
|
15,845
|
|
|
17,482
|
|
|
33.7
|
%
|
|
14.7
|
%
|
|
(1,637
|
)
|
|
(9.4
|
)%
|
|||
Other, net
|
—
|
|
|
683
|
|
|
—
|
%
|
|
0.6
|
%
|
|
(683
|
)
|
|
(100.0
|
)%
|
|||
Total costs and expenses
|
61,914
|
|
|
118,864
|
|
|
131.8
|
%
|
|
99.8
|
%
|
|
(56,950
|
)
|
|
(47.9
|
)%
|
|||
Operating (loss) income
|
(14,939
|
)
|
|
248
|
|
|
(31.8
|
)%
|
|
0.2
|
%
|
|
(15,187
|
)
|
|
(6,123.8
|
)%
|
|||
Interest expense, net
|
(12,045
|
)
|
|
(12,588
|
)
|
|
(25.6
|
)%
|
|
(10.6
|
)%
|
|
543
|
|
|
(4.3
|
)%
|
|||
Other income, net
|
158
|
|
|
321
|
|
|
0.3
|
%
|
|
0.3
|
%
|
|
(163
|
)
|
|
(50.8
|
)%
|
|||
Loss on extinguishment of debt
|
(390
|
)
|
|
—
|
|
|
(0.8
|
)%
|
|
—
|
%
|
|
—
|
|
|
100.0
|
%
|
|||
Loss from continuing operations before income taxes
|
(27,216
|
)
|
|
(12,019
|
)
|
|
(57.9
|
)%
|
|
(10.1
|
)%
|
|
(15,197
|
)
|
|
126.4
|
%
|
|||
Income tax (expense) benefit
|
(55
|
)
|
|
24
|
|
|
(0.1
|
)%
|
|
—
|
%
|
|
(79
|
)
|
|
(329.2
|
)%
|
|||
Loss from continuing operations
|
(27,271
|
)
|
|
(11,995
|
)
|
|
(58.1
|
)%
|
|
(10.1
|
)%
|
|
(15,276
|
)
|
|
127.4
|
%
|
|||
Income from discontinued operations, net of income taxes
|
55
|
|
|
921
|
|
|
0.1
|
%
|
|
0.8
|
%
|
|
(866
|
)
|
|
(94.0
|
)%
|
|||
Net loss attributable to common shareholders
|
$
|
(27,216
|
)
|
|
$
|
(11,074
|
)
|
|
(57.9
|
)%
|
|
(9.3
|
)%
|
|
$
|
(16,142
|
)
|
|
145.8
|
%
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
Net cash provided by (used in) continuing operations:
|
|
2016
|
|
2015
|
||||
Operating activities
|
|
$
|
2,565
|
|
|
34,750
|
|
|
Investing activities
|
|
(172
|
)
|
|
(4,195
|
)
|
||
Financing activities
|
|
(41,672
|
)
|
|
(8,436
|
)
|
||
Net (decrease) increase in cash and cash equivalents from continuing operations
|
|
$
|
(39,279
|
)
|
|
$
|
22,119
|
|
•
|
Reduces the maximum revolver commitments from
$125.0 million
to
$100.0 million
;
|
•
|
Replaces the leverage ratio financial maintenance covenant with a new minimum EBITDA financial maintenance covenant that will be tested monthly;
|
•
|
Amends the definition of “EBITDA” for purposes of the financial maintenance covenant to provide allowances for certain unusual or non-recurring fees, costs and expenses, with testing monthly beginning in April 2016;
|
•
|
Amends the definition of “Borrowing Base” (i) to set the eligible equipment advance rates based on net book value at
60%
and on Net Orderly Liquidation Value (as defined in the ABL Facility) at
80%
and (ii) to cap Borrowing Base availability attributable to eligible equipment at
75%
;
|
•
|
Increases the default rate upon the occurrence and continuation of an event of default from
2%
to
4%
;
|
•
|
Increases the applicable margin on LIBOR Rate and Base Rate Loans (each as defined in the ABL Facility) and the unused line fee;
|
•
|
Eliminates our ability to voluntarily reduce the commitments without termination of the ABL Facility;
|
•
|
Requires us to apply proceeds from the Restructuring transactions and related agreements to pay down the ABL Facility;
|
•
|
Amends the definition of “Permitted Disposition” to permit the sale of our equity investment in Underground Solutions, Inc., discussed further in Note 13, and to expand the permitted disposition general basket (which excludes the sale of machinery and equipment in the ordinary course of business) from $5.0 million to $7.5 million;
|
•
|
Applies a Permitted Disposition Reserve of 50% against our availability for net cash proceeds in excess of $7.5 million made on or after March 10, 2016 for sales specifically related to the Permitted Disposition general basket; and
|
•
|
Amends certain definitions in connection with the Restructuring transactions, including “Change of Control”, “Permitted Indebtedness”, and “Permitted Liens”.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Loss from continuing operations
|
$
|
(27,271
|
)
|
|
$
|
(11,995
|
)
|
Depreciation and amortization
|
15,845
|
|
|
17,482
|
|
||
Interest expense, net
|
12,045
|
|
|
12,588
|
|
||
Income tax expense (benefit)
|
55
|
|
|
(24
|
)
|
||
EBITDA
|
$
|
674
|
|
|
$
|
18,051
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
•
|
our debt holders could declare all outstanding principal and interest to be due and payable; and
|
•
|
we could be forced into bankruptcy or liquidation.
|
•
|
it may limit our ability to borrow money for our debt service requirements or other purposes;
|
•
|
a substantial portion of our cash flow will be dedicated to the repayment of our indebtedness and will not be available for other purposes;
|
•
|
it may limit our flexibility in planning for, or reacting to, changes in our operations or business;
|
•
|
we are and will be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;
|
•
|
it may make us more vulnerable to downturns in our business or the economy;
|
•
|
it may restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities; and
|
•
|
it may limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets.
|
•
|
incur additional debt;
|
•
|
pay dividends, redeem stock or make other distributions;
|
•
|
make other restricted payments and investments;
|
•
|
create liens;
|
•
|
enter into sale and leaseback transactions;
|
•
|
merge, consolidate or transfer or dispose of substantially all of our assets; and
|
•
|
enter into certain types of transactions with affiliates.
|
•
|
our debt holders could declare all outstanding principal and interest to be due and payable; and
|
•
|
we could be forced into bankruptcy or liquidation.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Defaults Upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
Exhibit
Number
|
Description
|
|
|
10.1
|
First Amendment to Executive Employment Agreement, dated January 25, 2016, between the Nuverra Environmental Solutions, Inc. and Mark D. Johnsrud (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 25, 2016).
|
|
|
10.2*
|
Employment Agreement, dated February 5, 2016, between Nuverra Environmental Solutions, Inc. and Joseph M. Crabb.
|
|
|
10.3
|
Consent and Fifth Amendment to Amended and Restated Credit Agreement, dated March 10, 2016, by and among Wells Fargo Bank, National Association, the Lenders named therein, and Nuverra Environmental Solutions, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 14, 2016).
|
|
|
10.4
|
Third Amendment to Amended and Restated Guaranty and Security Agreement, dated March 10, 2016, by and among Nuverra Environmental Solutions, Inc., certain subsidiaries of Nuverra Environmental Solutions, Inc. named therein, and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 14, 2016).
|
|
|
10.5
|
Restructuring and Support Agreement, dated March 11, 2016, by and among Nuverra Environmental Solutions, Inc., certain subsidiaries of Nuverra Environmental Solutions, Inc., the Supporting Holders, and Mark D. Johnsrud (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 14, 2016).
|
|
|
10.6
|
Sixth Amendment to Amended and Restated Credit Agreement, dated March 24, 2016, by and among Wells Fargo Bank, National Association, the Lenders named therein, and Nuverra Environmental Solutions, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 29, 2016).
|
|
|
31.1*
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2*
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1*
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS*
|
XBRL Instance Document.
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
*
|
Filed herewith.
|
Date: May 9, 2016
|
|
|
|
/s/ Mark D. Johnsrud
|
|
Name:
|
Mark D. Johnsrud
|
Title:
|
President and Chief Executive Officer
|
|
(Principal Executive Officer and Principal Financial Officer)
|
By:
|
/s/ Mark D. Johnsrud
|
Its:
|
February 5, 2016
|
|
EMPLOYEE:
|
|
/s/ Joseph M. Crabb
|
|
|
1.
|
I have reviewed this report on Form 10-Q for the period ended
March 31, 2016
of Nuverra Environmental Solutions, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
/s/ Mark D. Johnsrud
|
Name:
|
Mark D. Johnsrud
|
Title:
|
President and Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this report on Form 10-Q for the period ended
March 31, 2016
of Nuverra Environmental Solutions, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
/s/ Mark D. Johnsrud
|
Name:
|
Mark D. Johnsrud
|
Title:
|
President and Chief Executive Officer
(Principal Financial Officer)
|
(1)
|
The report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 as amended; and
|
(2)
|
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
/s/ Mark D. Johnsrud
|
Name:
|
Mark D. Johnsrud
|
Title:
|
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)
|