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EX-2.2 - EXHIBIT 2.2 - Nuverra Environmental Solutions, Inc.nes_20150331xex22.htm
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EX-32.1 - EXHIBIT 32.1 - Nuverra Environmental Solutions, Inc.nes_20150331xex321.htm
EX-31.1 - EXHIBIT 31.1 - Nuverra Environmental Solutions, Inc.nes_20150331xex311.htm
EXCEL - IDEA: XBRL DOCUMENT - Nuverra Environmental Solutions, Inc.Financial_Report.xls



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 001-33816
__________________________________
__________________________________
Delaware
26-0287117
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
14624 N. Scottsdale Rd., Suite 300, Scottsdale, Arizona 85254
(602) 903-7802
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
__________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
x
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x
The number of shares outstanding of the registrant’s common stock as of May 5, 2015 was 27,918,592.




TABLE OF CONTENTS
 
 
 
 
 
 
 
 

2


Forward-Looking Statements
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the United States Securities Exchange Act of 1934, as amended, or the “Exchange Act.” These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including, but not limited to, statements regarding:
future financial performance and growth targets or expectations;
market and industry trends and developments;
the potential benefits of our completed and any future merger, acquisition, disposition and financing transactions; and
plans to increase operational capacity, including additional trucks, saltwater disposal wells, frac tanks, landfills, processing and treatment facilities and pipeline construction or expansion.
You can identify these and other forward-looking statements by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target” or similar expressions, and variations or negatives of these words.
These forward-looking statements are based on information available to us as of the date of this Quarterly Report and our current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured, and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include:
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;
risks associated with our indebtedness, including our ability to manage our liquidity needs and to comply with covenants under our credit facilities, including the indenture governing our notes;
risks associated with our capital structure, including our ability to access necessary funding under our existing or future credit facilities and to generate sufficient operating cash flow to meet our debt service obligations;
difficulties in identifying and completing acquisitions and divestitures, and differences in the type and availability of consideration or financing for such acquisitions and divestitures;
difficulties in successfully executing our growth initiatives, including difficulties in permitting, financing and constructing pipelines and waste treatment assets and in structuring economically viable agreements with potential customers, financing sources and other parties;
our ability to attract, motivate and retain key executives and qualified employees in key areas of our business;
fluctuations in prices, transportation costs and demand for commodities such as oil and natural gas;
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;
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 delays or inefficiencies and reductions in volume due to micro- and macro-economic factors or the availability of less expensive alternatives;
risks associated with new technologies and the impact on our business;
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;
changes in economic conditions in the markets in which we operate or in the world generally, including as a result of political uncertainty;

3


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;
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;
control of costs and expenses;
present and possible future claims, litigation or enforcement actions or investigations;
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;
the threat or occurrence of international armed conflict;
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;
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 gas extraction businesses, particularly relating to water usage, and the disposal, transportation and treatment of liquid and solid wastes; and
other risks identified in this Quarterly Report or referenced from time to time in our filings with the United States Securities and Exchange Commission (the “SEC”).
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report. Except as required by law, we do not undertake any obligation to update or release any revisions to these forward-looking statements to reflect any events or circumstances, whether as a result of new information, future events, changes in assumptions or otherwise, after the date hereof.
Where You Can Find Other Information
Our website is www.nuverra.com. Information contained on our website is not part of this Quarterly Report on Form 10-Q. Information that we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. These reports and other information, including exhibits filed or furnished therewith, are also available at the SEC’s website at www.sec.gov. You may also obtain and copy any document we file with or furnish to the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330. You may request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549.
 

4


NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
PART I—FINANCIAL INFORMATION
Item  1.
Financial Statements.
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
March 31,
 
December 31,
 
2015
 
2014
 
(Unaudited)
 
(Note 1)
Assets
 
 
 
Cash and cash equivalents
$
35,486

 
$
13,367

Restricted cash

 
114

Accounts receivable, net of allowance for doubtful accounts of $7.4 and $7.6 million at March 31, 2015 and December 31, 2014, respectively
86,393

 
108,813

Inventories
4,131

 
4,413

Prepaid expenses and other receivables
5,420

 
4,147

Deferred income taxes
3,033

 
3,179

Other current assets
181

 
173

Current assets held for sale
17,711

 
20,466

Total current assets
152,355

 
154,672

Property, plant and equipment, net of accumulated depreciation of $171.8 and $155.8 million at March 31, 2015 and December 31, 2014, respectively
466,414

 
475,982

Equity investments
3,793

 
3,814

Intangibles, net
19,046

 
19,757

Goodwill
104,721

 
104,721

Other assets
16,501

 
17,688

Long-term assets held for sale
97,617

 
94,938

Total assets
$
860,447

 
$
871,572

Liabilities and Equity
 
 
 
Accounts payable
$
14,118

 
$
18,859

Accrued liabilities
53,216

 
43,395

Current portion of contingent consideration
9,409

 
9,274

Current portion of long-term debt
5,128

 
4,863

Financing obligation to acquire non-controlling interest
11,000

 
11,000

Current liabilities of discontinued operations
6,924

 
8,802

Total current liabilities
99,795

 
96,193

Deferred income taxes
3,303

 
3,448

Long-term portion of debt
587,158

 
592,455

Long-term portion of contingent consideration
106

 
550

Other long-term liabilities
3,874

 
3,874

Long-term liabilities of discontinued operations
22,332

 
22,105

Total liabilities
716,568

 
718,625

Commitments and contingencies

 

Common stock
29

 
29

Additional paid-in capital
1,367,618

 
1,365,537

Treasury stock
(19,726
)
 
(19,651
)
Accumulated deficit
(1,204,042
)
 
(1,192,968
)
Total equity of Nuverra Environmental Solutions, Inc.
143,879

 
152,947

Total liabilities and equity
$
860,447

 
$
871,572

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 

5


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Revenue:
 
 
 
Non-rental revenue
$
107,010

 
$
109,844

Rental revenue
12,102

 
18,170

Total revenue
119,112

 
128,014

Costs and expenses:
 
 
 
Direct operating expenses
87,999

 
95,379

General and administrative expenses
12,700

 
16,795

Depreciation and amortization
17,482

 
20,911

Other, net
683

 

Total costs and expenses
118,864

 
133,085

Operating income (loss)
248

 
(5,071
)
Interest expense, net
(12,588
)
 
(12,050
)
Other income (expense), net
321

 
(420
)
Loss on extinguishment of debt

 
(3,177
)
Loss from continuing operations before income taxes
(12,019
)
 
(20,718
)
Income tax benefit
24

 
8,804

Loss from continuing operations
(11,995
)
 
(11,914
)
Income from discontinued operations, net of income taxes
921

 
459

Net loss attributable to common stockholders
$
(11,074
)
 
$
(11,455
)
 
 
 
 
Net loss per common share attributable to common stockholders:
 
 
 
Basic and diluted loss from continuing operations
$
(0.44
)
 
$
(0.48
)
Basic and diluted income from discontinued operations
0.03

 
0.02

Net loss per basic and diluted common share
$
(0.41
)
 
$
(0.46
)
 
 
 
 
Weighted average shares outstanding used in computing net loss per basic and diluted common share
27,412

 
25,020

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


6


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(11,074
)
 
$
(11,455
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Income from discontinued operations, net of income taxes
(921
)
 
(459
)
Depreciation
16,771

 
16,607

Amortization of intangible assets
711

 
4,304

Amortization of deferred financing costs
1,207

 
523

Amortization of original issue discounts and premiums, net
40

 
36

Stock-based compensation
789

 
293

Gain on disposal of property, plant and equipment
(654
)
 
(1,255
)
Bad debt expense
732

 
773

Loss on extinguishment of debt

 
3,177

Deferred income taxes
1

 
(8,804
)
Other, net
(418
)
 
463

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
21,688

 
(14,902
)
Prepaid expenses and other receivables
(1,273
)
 
(1,982
)
Accounts payable and accrued liabilities
6,949

 
12,523

Other assets and liabilities, net
202

 
(215
)
Net cash provided by (used in) operating activities from continuing operations
34,750

 
(373
)
Net cash provided by operating activities from discontinued operations
867

 
3,409

Net cash provided by operating activities
35,617

 
3,036

Cash flows from investing activities:
 
 
 
Proceeds from the sale of property, plant and equipment
1,968

 
1,551

Purchases of property, plant and equipment
(6,163
)
 
(7,743
)
Net cash used in investing activities from continuing operations
(4,195
)
 
(6,192
)
Net cash used in investing activities from discontinued operations
(161
)
 
(1,050
)
Net cash used in investing activities
(4,356
)
 
(7,242
)
Cash flows from financing activities:
 
 
 
Proceeds from revolving credit facility

 
17,725

Payments on revolving credit facility
(7,000
)
 
(8,000
)
Payments for deferred financing costs

 
(343
)
Payments on notes payable and capital leases
(1,361
)
 
(1,429
)
Other financing activities
(75
)
 
25

Net cash (used in) provided by financing activities from continuing operations
(8,436
)
 
7,978

Net cash provided by financing activities from discontinued operations
38

 

Net cash (used in) provided by financing activities
(8,398
)
 
7,978

Net increase in cash and cash equivalents
22,863

 
3,772

Cash and cash equivalents - beginning of period
15,416

 
9,212

Cash and cash equivalents - end of period
38,279

 
12,984

Less: cash and cash equivalents of discontinued operations - end of period
2,793

 
2,788

Cash and cash equivalents of continuing operations - end of period
$
35,486

 
$
10,196

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
949

 
$
597

Cash paid for taxes, net
94

 
23

Supplemental schedule of non-cash investing and financing activities:
 
 
 
Common stock issued for contingent consideration

 
3,789

Purchases of property, plant and equipment under capital leases
2,882

 

Property, plant and equipment purchases in accounts payable
2,242

 
5,870

Restricted cash payable to former sole owner of Power Fuels

 
112

Conversion of accrued interest on principal debt balance
407

 
596

Deferred financing costs financed through principal debt balance

 
2,541

Deferred financing costs in accounts payable and accrued liabilities
173

 
492


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 

7


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of Nuverra Environmental Solutions, Inc. and its subsidiaries (collectively, “Nuverra,” the “Company” or “we”) have been prepared in accordance with the rules and regulations of the SEC. In the opinion of management, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth herein. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts, transactions and profits are eliminated in consolidation. All dollar and share amounts in the footnote tabular presentations are in thousands, except per share amounts and unless otherwise noted.
The Company’s condensed consolidated balance sheet as of December 31, 2014, included herein, has been derived from the audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015 (“2014 Annual Report on Form 10-K”). Unless stated otherwise, any reference to statement of operations items in these accompanying unaudited interim condensed consolidated financial statements refers to results from continuing operations. The Company has not included a statement of comprehensive income as there were no transactions to report in the periods presented. In addition, certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been omitted from these financial statements and related notes pursuant to the rules and regulations of the SEC. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, contained in the Company’s 2014 Annual Report on Form 10-K as well as other information it has filed with the SEC.
Reclassifications
Certain reclassifications and adjustments have been made to prior period amounts in the accompanying condensed consolidated statements of operations and notes thereto in order to conform to the current year’s presentation including:
As described in Note 13, the Company redefined its operating and reportable segments during the three months ended September 30, 2014 and as a result, prior year periods have been recast to conform to the current year segment presentation.
A portion of certain non-medical insurance costs previously presented as a component of “General and administrative expenses” in the condensed consolidated statement of operations have been re-allocated and are now included in the line item “Direct operating expenses” as the Company believes these costs are directly related to the operations of the Company. Such costs were approximately $1.7 million for the three months ended March 31, 2014.
(2) Significant Accounting Policies
There have been no material changes or developments in the Company’s significant accounting policies or evaluation of accounting estimates and underlying assumptions or methodologies that are “Critical Accounting Policies and Estimates” as disclosed in the Company’s 2014 Annual Report on Form 10-K.
In April 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in this update will be added to Accounting Standards Codification (“ASC”) Topic 205, Presentation of Financial Statements and ASC Topic 360, Property, Plant, and Equipment. The standard changes the criteria for reporting discontinued operations and enhancing convergence of the FASB’s and the International Accounting Standard Board’s reporting requirements for discontinued operations. The amendment adds a requirement to the threshold for items held for sale or disposed of that the discontinuation of the component of the entity must also have a strategic shift with a major effect on operations and financial results. Additionally, an asset held for sale on acquisition will have to meet all of the held for sale criteria on the acquisition date. The amendment removed the prohibition of significant ongoing involvement in the operations of the component of the entity. The amendments in this update are effective prospectively for reporting periods beginning after December 15, 2014, which for the Company is the reporting period beginning January 1, 2015. The amendment does not apply to components classified as held for sale before the effective date and does not change the presentation of components previously classified as discontinued operations. As described in Note 14, during the fourth quarter of 2013, our board of directors approved and committed to a plan to divest Thermo Fluids Inc. ("TFI"), which comprised our previously reported industrial solutions business segment. As a result, we consider TFI to be held for sale and its assets and liabilities, results of operations and cash flows are presented as discontinued operations in the accompanying condensed consolidated financial statements for the three months ended March 31, 2015 and 2014. The Company has assessed the impact of ASU No. 2014-08

8


and determined all criterion to be initially classified as held for sale have been qualitatively, quantitatively, and on the whole, substantially met with respect to the TFI sale.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The amendments in this update will be added to the ASC as Topic 606, Revenue from Contracts with Customers, and replaces the guidance in Topic 605. The underlying principle of the guidance in this update is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. This new revenue standard also calls for more detailed disclosures and provides guidance for transactions that weren’t addressed completely, such as service revenue and contract modifications. The amendments in this update may be applied retrospectively or modified retrospectively effective for reporting periods beginning after December 15, 2016, which for the Company is the reporting period starting January 1, 2017. The Company is reviewing the guidance in ASU 2014-09 and has not concluded the impact, if any, on its consolidated financial statements and has not determined its method of adoption. However, based upon the Company's preliminary assessment of ASU No. 2014-09, the Company does not believe the adoption of ASU 2014-09 will have a material impact on the Company’s consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). The amendments in this update will be added to the ASC as Topic 718, Compensation - Stock Compensation, and will require a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. A performance condition is not considered in determining the award’s grant date fair value. Instead, it is considered when a company estimates the number of awards that will vest. Compensation cost is recognized when it is probable that the performance condition will be met. As such, the entity must reassess whether that is the case each reporting period and reverse any previously recognized compensation cost if it is no longer probable that the performance condition will be met. The amendment in this update may be applied prospectively for share-based payment awards granted or modified on or after the reporting period starting January 1, 2017, or retrospectively, using a modified retrospective approach. The Company is reviewing the guidance in ASU 2014-12 and does not believe the adoption of ASU 2014-12 will have a material impact on the Company’s consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for the Company in the first quarter of 2016 with early adoption permitted. The Company is reviewing the guidance in ASU 2014-15 and does not believe the adoption of ASU 2014-15 will have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which amends ASC Subtopic 835-30, Interest - Imputation of Interest.  The amendments in this ASU simplify the presentation of debt issuance costs and align the presentation with debt discounts.  Entities will be required to present debt issuance costs as a direct deduction from the face amount of the related note, rather than as a deferred charge.  Upon adoption, the amended guidance will affect the Company's classification of debt issuance costs, which are currently classified in "Other assets" in the condensed consolidated balance sheets.  The reclassification of debt issuance costs will effectively decrease "Other assets" and correspondingly decrease the respective long-term debt balances.  The amendments in this ASU require retrospective application, with related disclosures for a change in accounting principle.  Upon adoption, the Company will comply with these disclosure requirements by providing the nature and reason for the change, the transition method, a description of the adjusted prior period information and the effect of the change on the financial statement line items.   For public business entities, the amendments in this ASU will be effective for financial statements issued for fiscal years beginning after December 15, 2015, and the interim periods within those fiscal years.  Early adoption is permitted; however, the Company expects to adopt this guidance at the beginning of 2016.  The Company's debt issuance costs as of March 31, 2015 were $16.1 million.
(3) Earnings Per Share
Basic and diluted loss per common share from continuing operations, basic and diluted loss per common share from discontinued operations and net loss per basic and diluted common share have been computed using the weighted average number of shares of common stock outstanding during the period. Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is based upon the weighted average number of common shares outstanding during the period plus the additional weighted average common equivalent shares during the period. Common equivalent shares result from the assumed exercise of outstanding warrants, restricted stock and stock options, the proceeds of which are then assumed

9


to have been used to repurchase outstanding shares of common stock. Inherently, stock warrants are deemed to be antidilutive when the average market price of the common stock during the period is less than the exercise prices of the stock warrants.
Pursuant to ASC Topic 260-10-45-18, an entity that reports a discontinued operation in a period shall use income (loss) from continuing operations, adjusted for preferred dividends, as the control number in determining whether potential common equivalent shares are dilutive or antidilutive. That is, the same number of potential common equivalent shares used in computing the diluted per-share amount for income (loss) from continuing operations shall be used in computing all other reported diluted per-share amounts even if those amounts would be antidilutive to their respective basic per-share amounts. For the three months ended March 31, 2015 and 2014, no shares of common stock underlying stock options, restricted stock, or other common stock equivalents were included in the computation of diluted EPS from continuing operations because the inclusion of such shares would be antidilutive based on the net losses from continuing operations reported for those periods. Accordingly, for the three-month periods ended March 31, 2015 and 2014, no shares of common stock underlying stock options, restricted stock, or other common stock equivalents were included in the computations of diluted EPS from loss from discontinued operations or diluted EPS from net loss per common share, because such shares were excluded from the computation of diluted EPS from continuing operations for those periods based on the guidance referenced above.
The following table presents the calculation of basic and diluted net loss per common share:
 
Three Months Ended
 
March 31,
 
2015
 
2014
Numerator:
 
 
 
Loss from continuing operations
(11,995
)
 
(11,914
)
Income from discontinued operations
921

 
459

Net loss attributable to common stockholders
$
(11,074
)
 
$
(11,455
)
 
 
 
 
Denominator:
 
 
 
Weighted average shares—basic
27,412

 
25,020

Common stock equivalents

 

Weighted average shares—diluted
27,412

 
25,020

 
 
 
 
Basic and diluted loss per common share from continuing operations
$
(0.44
)
 
$
(0.48
)
Basic and diluted income per common share from discontinued operations
0.03

 
0.02

Net loss per basic and diluted common share
$
(0.41
)
 
$
(0.46
)
 
 
 
 
Antidilutive stock-based awards excluded
879

 
245

(4) Goodwill and Intangible Assets
Previous Impairments
The Company has recorded significant impairment charges in the past, most recently during the three months ended December 31, 2014. The Company believes the assumptions used in its previous impairment analyses were appropriate and resulted in reasonable estimates of fair values. In evaluating the reasonableness of the Company’s fair value estimates, the Company considers (among other factors) the relationship between its book value, the market price of its common stock and the fair value of its reporting units. At March 31, 2015 and May 5, 2015, the closing market prices of the Company’s common stock were $3.56 and $3.97 per share, respectively, compared to its book value per share of $5.15 as of March 31, 2015. If the Company’s book value per share were to continue to exceed its market price per share plus a control premium as indicated at May 5, 2015, or if there is continued downward pricing in services driven by oil and gas price depression, it would likely indicate the occurrence of events or changes that would cause the Company to perform additional impairment analyses which could result in revisions to its fair value estimates. While the Company believes that its estimates of fair value are reasonable, the Company will continue to monitor and evaluate this relationship. Additionally, should actual results differ materially from the Company's projections, additional impairment would likely result.

10


Intangible Assets
Intangible assets consist of the following:
 
March 31, 2015
 
December 31, 2014
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
 
Remaining Useful Life (Years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
 
Remaining Useful Life (Years)
Customer relationships
$
11,694

 
$
(5,545
)
 
$
6,149

 
6.4
 
$
11,694

 
$
(5,133
)
 
$
6,561

 
6.6
Disposal permits
1,269

 
(329
)
 
940

 
5.9
 
1,269

 
(288
)
 
981

 
6.2
Customer contracts
17,352

 
(5,395
)
 
11,957

 
11.8
 
17,352

 
(5,137
)
 
12,215

 
12.0
 
$
30,315

 
$
(11,269
)
 
$
19,046

 
9.7
 
$
30,315

 
$
(10,558
)
 
$
19,757

 
9.9
The remaining weighted average useful lives shown are calculated based on the net book value and remaining amortization period of each respective intangible asset.
(5) Fair Value Measurements
Measurements
Fair value represents an exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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.
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 and the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value used significant unobservable inputs (Level 3) and were as follows:
 
Fair Value
March 31, 2015
 
Assets - cost method investment
$
3,169

Liabilities:
 
Contingent consideration
9,515

Financing obligation to acquire non-controlling interest
11,000

December 31, 2014
 
Assets - cost method investment
$
3,169

Liabilities:
 
Contingent consideration
9,824

Financing obligation to acquire non-controlling interest
11,000

Contingent Consideration
The Company and its subsidiaries are liable for certain contingent consideration payments in connection with the performance of various acquisitions. The fair values of the contingent consideration obligations were determined using a probability-weighted income approach at the acquisition date and are revalued at each reporting date or more frequently if circumstances dictate based on changes in the discount periods and rates, changes in the timing and amount of the revenue estimates and changes in probability assumptions with respect to the likelihood of achieving the performance measurements upon which the obligations are based. Contingent consideration is reported as "Current portion of contingent consideration" and "Long-term portion of contingent consideration" in the Company’s condensed consolidated balance sheets. Changes to the fair value of contingent consideration are recorded as "Other income (expense), net" in the Company’s condensed consolidated statements of operations. Accretion expense related to the increase in the net present value of the contingent liabilities is included in interest

11


expense for the period. The fair value measurement is based on significant inputs not observable in the market, which are referred to as Level 3 inputs.
Changes to contingent consideration obligations during the three months ended March 31, 2015 and the year ended December 31, 2014 were as follows:
 
March 31, 2015
 
December 31, 2014
Balance at beginning of period
$
9,824

 
$
15,457

Additions related to acquisitions

 

Accretion

 
476

Cash payments

 
(1,014
)
Issuances of stock

 
(3,789
)
Changes in fair value of contingent consideration, net
(309
)
 
(1,306
)
Balance at end of period
9,515

 
9,824

Less: current portion
(9,409
)
 
(9,274
)
Long-term portion of contingent consideration
$
106

 
$
550

Financing Obligation to Acquire Non-Controlling Interest
The fair value of the financing obligation to acquire non-controlling interest represents the present value of the Company’s right to acquire the remaining 49% interest in Appalachian Water Services, LLC (“AWS”) from the non-controlling interest holder at a fixed price of $11.0 million payable in shares of the Company’s common stock. The non-controlling interest holder had a put option to sell the remaining 49% to the Company under the same terms beginning in January 2015. In January 2015, the non-controlling interest holder provided notice to the Company of exercise of such put option. On April 28, 2015 the non-controlling interest holder issued to the Company a Demand for Arbitration pursuant to the terms of the AWS operating agreement. The Company is in discussions with the non-controlling interest holder regarding the exercise terms of such put option, and the closing of such put option has not occurred. In accordance with ASC 480, Distinguishing Liabilities from Equity, the instrument is accounted for as a financing of the Company’s purchase of the minority interest.
Other
In addition to the Company’s assets and liabilities that are measured at fair value on a recurring basis, the Company is required by GAAP to measure certain assets and liabilities at fair value on a nonrecurring basis after initial recognition. Generally, assets, liabilities and reporting units are measured at fair value on a nonrecurring basis as a result of impairment reviews and any resulting impairment charge. In connection with its impairment review of long-lived assets, the Company measures the fair value of its asset groups for those asset groups deemed not recoverable, based on Level 3 inputs consisting of the discounted future cash flows associated with the use and eventual disposition of the asset group. In connection with its goodwill impairment review, the Company measures the fair value of its reporting units using a combination of the discounted cash flow method and the guideline public company method. The discounted cash flow method is based on Level 3 inputs consisting primarily of the Company’s five-year forecast and utilizes forward-looking assumptions and projections as well as factors impacting long-range plans such as pricing, discount rates and commodity prices. The guideline public company method is based on Level 2 inputs and considers potentially comparable companies and transactions within the industries where the Company’s reporting units participate, and applies their trading multiples to the Company’s reporting units. This approach utilizes data from actual marketplace transactions, but reliance on its results is limited by difficulty in identifying entities that are specifically comparable to the Company’s reporting units, considering their diversity, relative sizes and levels of complexity.
Cost method investments are measured at fair value on a nonrecurring basis when deemed necessary, using observable inputs such as trading prices of the stock as well as using discounted cash flows, incorporating adjusted available market discount rate information and the Company’s estimates for liquidity risk.

12


(6) Accrued Liabilities
Accrued liabilities consist of the following:
 
March 31, 2015
 
December 31, 2014
Accrued payroll and employee benefits
$
13,626

 
$
12,566

Accrued insurance
6,787

 
6,830

Accrued legal and environmental costs
921

 
1,421

Accrued taxes
2,042

 
1,477

Accrued interest
18,423

 
8,570

Amounts payable to related party (Note 12)

 
114

Accrued operating costs
7,715

 
5,685

Accrued other
3,702

 
6,732

Total accrued liabilities
$
53,216

 
$
43,395

(7) Debt
Debt consists of the following at March 31, 2015 and December 31, 2014:
 
 
 
 
 
March 31, 2015
 
December 31, 2014
 
Interest Rate
 
Maturity Date
 
Unamortized Deferred Financing Costs
 
Fair Value of Debt (e)
 
Carrying Value of Debt
 
Carrying Value of Debt
ABL Facility (a)
2.41%
 
Jan. 2018
 
5,026

 
176,481

 
176,481

 
183,065

2018 Notes (b)
9.875%
 
Apr. 2018
 
11,109

 
268,200

 
400,000

 
400,000

Vehicle financings (c)
3.30%
 
Various
 

 
16,384

 
16,384

 
14,872

Total debt
 
 
 
 
$
16,135

 
$
461,065

 
592,865

 
597,937

Original issue discount (d)
 
 
 
 
 
 
 
 
(818
)
 
(874
)
Original issue premium (d)
 
 
 
 
 
 
 
 
239

 
255

Total debt, net
 
 
 
 
 
 
 
 
592,286

 
597,318

Less: current portion
 
 
 
 
 
 
 
 
(5,128
)
 
(4,863
)
Long-term portion of debt
 
 
 
 
 
 
 
 
$
587,158

 
$
592,455

_____________________
(a)
The interest rate presented represents the interest rate on the $245.0 million ABL Facility at March 31, 2015.
(b)
The interest rate presented represents the coupon rate on the Company’s 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 in April and October.
(c)
Vehicle financings consist of installment notes payable and capital lease arrangements related to fleet purchases with a weighted-average annual interest rate of approximately 3.30% and which mature in varying installments between 2015 and 2017. Installment notes payable and capital lease obligations were $0.1 million and $16.3 million, respectively, at March 31, 2015 and were $0.3 million and $14.6 million, respectively, at December 31, 2014.
(d)
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.
(e)
The estimated fair value of the Company’s 2018 Notes is based on quoted market prices as of March 31, 2015. The Company’s ABL Facility and vehicle financings bear interest at rates commensurate with market rates and therefore their respective carrying values approximate fair value.

13


There have been no material changes or developments in the Company’s debt and its principal terms, except as described under ABL Facility Amendment below, from Note 10 to the consolidated financial statements of the Company’s 2014 Annual Report on Form 10-K.
Indebtedness
The Company is highly leveraged and a substantial portion of its liquidity needs result from debt service requirements and from funding its costs of operations and capital expenditures, including acquisitions.
Financial Covenants and Borrowing Limitations
The Company's Amended and Restated Credit Agreement by and among the Company, Wells Fargo Bank, N.A. and the Lenders named therein (the "ABL Facility") requires, and any future credit facilities will likely require, the Company to comply with specified financial ratios that may limit the amount the Company can borrow under its ABL Facility. A breach of any of the covenants under the indenture governing the 2018 Notes or the ABL Facility, as applicable, could result in a default. The Company's ability to satisfy those covenants depends principally upon its ability to meet or exceed certain positive operating performance metrics including, but not limited to, earnings before interest, taxes, depreciation and amortization, or EBITDA, and ratios thereof, as well as certain balance sheet ratios. Any debt agreements the Company enters into in the future may further limit its ability to enter into certain types of transactions.
The ABL Facility contains certain financial covenants that require the Company to maintain a senior leverage ratio and, upon the occurrence of certain specified conditions, a fixed charge coverage ratio as well as certain customary limitations on the Company's ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividends, dispose of assets or undergo a change in control. The senior leverage ratio is calculated as the ratio of senior secured debt to adjusted EBITDA (which includes net (loss) income plus certain items such as interest, taxes, depreciation, amortization, impairment charges, stock-based compensation and other adjustments as defined in the indenture), and is limited to 3.0 to 1.0. The Company's $400.0 million of 2018 Notes are not secured and thus are excluded from the calculation of this ratio. The fixed charge coverage ratio, which only applies if excess availability under the ABL Facility falls below 12.5% of the maximum revolver amount, requires the ratio of adjusted EBITDA (as defined) less capital expenditures to fixed charges (as defined) to be at least 1.1 to 1.0. The senior leverage ratio and fixed charge coverage ratio covenants could have the effect of limiting the Company's availability under the ABL Facility, as additional borrowings would be prohibited if, after giving pro forma effect thereto, the Company would be in violation of either such covenant. As of March 31, 2015, the Company remained in compliance with its debt covenants and the availability was $53.0 million; however, the Company's ratio of adjusted EBITDA to fixed charges was less than 1.1 to 1.0 (as calculated pursuant to the ABL Facility). As such, the Company's net availability was reduced by 12.5% of the maximum revolver amount, or $30.6 million, resulting in approximately $22.4 million of net availability as of March 31, 2015.
The maximum amount the Company can borrow under our ABL Facility is subject to contractual and borrowing base limitations which could significantly and negatively impact its future access to capital required to operate its business. Borrowing base limitations are based upon eligible accounts receivable and equipment. If the value of its accounts receivable or equipment decreases for any reason, or if some portion of its accounts receivable or equipment is deemed ineligible under the terms of its ABL Facility agreement, the amount the Company can borrow under the ABL Facility could be reduced. These limitations could have a material adverse impact on the Company's liquidity and financial condition. In addition, the administrative agent for the Company's ABL Facility has the periodic right to perform an appraisal of the assets comprising the Company's borrowing base. If an appraisal results in a reduction of the borrowing base, then a portion of the outstanding indebtedness under the ABL Facility could become immediately due and payable. Any such repayment obligation could have a material adverse impact on the Company's liquidity and financial condition.
The indenture governing the 2018 Notes contains restrictive covenants on the incurrence of senior secured indebtedness, including incurring new borrowings under the ABL Facility, which would limit its ability to incur incremental new senior secured indebtedness in certain circumstances and access to capital if the Company's fixed charge coverage ratio falls below 2.0 to 1.0. To the extent that the fixed charge coverage ratio is below 2.0 to 1.0, the indenture prohibits the Company's incurrence of new senior secured indebtedness, at that point in time, to the greater of $150.0 million and the amount of debt as restricted by the secured leverage ratio, which is the ratio of senior secured debt to EBITDA, of 2.0 to 1.0, as determined pursuant to the indenture. The covenant does not require repayment of existing borrowings if greater than $150 million at that time, but rather limits new borrowings during any such period.  The 2.0 to 1.0 fixed charge coverage ratio is an incurrence covenant, not a maintenance covenant.

The covenants described above are subject to important exceptions and qualifications. The Company's ability to comply with these covenants will likely be affected by some events beyond its control, and the Company cannot guarantee that it will satisfy those requirements. A breach of any of these provisions could result in a default under such indenture, ABL Facility or other

14


debt obligation, or any future credit facilities the Company may enter into, which could allow all amounts outstanding thereunder to be declared immediately due and payable, subject to the terms and conditions of the documents governing such indebtedness. If the Company was unable to repay the accelerated amounts, its secured lenders could proceed against the collateral granted to them to secure such indebtedness. This would likely in turn trigger cross-acceleration and cross-default rights under any other credit facilities and indentures. If the amounts outstanding under the 2018 Notes or any other indebtedness outstanding at such time were to be accelerated or were the subject of foreclosure actions, the Company cannot guarantee that its assets would be sufficient to repay in full the money owed to the lenders or to its other debt holders. The Company was in compliance with such covenants as of March 31, 2015.
The Company may also be prevented from taking advantage of business opportunities that arise because of the limitations imposed on it by such restrictive covenants. These restrictions may also limit the Company's ability to plan for or react to market conditions, meet capital needs or otherwise restrict its activities or business plans and adversely affect its ability to finance its operations, enter into acquisitions, execute its business strategy, effectively compete with companies that are not similarly restricted or engage in other business activities that would be in its interest. In the future, the Company may also incur debt obligations that might subject it to additional and different restrictive covenants that could affect its financial and operational flexibility. The Company cannot guarantee that it will be granted waivers or amendments to the indenture governing the 2018 Notes, the ABL Facility or such other debt obligations if for any reason the Company is unable to comply with its obligations thereunder or that it will be able to refinance its debt on acceptable terms, or at all, should the Company seek to do so. Any such limitations on borrowing under the Company's ABL Facility could have a material adverse impact on the Company's liquidity.
ABL Facility Amendment
In connection with the closing of the TFI disposition, the Company entered into a Second Amendment, Consent and Release to Amended and Restated Credit Agreement (the “ABL Facility Amendment”), dated April 13, 2015, by and among the Company, Wells Fargo Bank, National Association, as agent, and the lenders named therein, which amends the ABL Facility. The ABL Facility Amendment reduced the maximum revolver availability from $245.0 million to $195.0 million and removed the accordion feature. Pricing of the ABL Facility remained the same other than corresponding changes reflecting the reduction of maximum revolver availability. The ABL Facility Amendment also reflects an updated appraisal for machinery and equipment that is used in the borrowing base formula. The Company did not incur any amendment fees associated with the ABL Facility Amendment. The Company does expect to write-off unamortized deferred financing costs associated with its ABL Facility of approximately $1.1 million in the three months ending June 30, 2015.
Liquidity Update
As of April 17, 2015, following the closing of the sale of TFI (Note 14), total liquidity was $77.3 million, comprised of $55.4 million of net availability under the revolving credit facility and $21.9 million cash on hand.
(8) Restructuring and Exit Costs
In March 2015, the Company initiated a plan to restructure its business in certain shale basins and reduce costs, including an exit from the Mississippian ("MidCon") shale area and the Tuscaloosa Marine Shale logistics business. Additionally, the Company closed certain yards within the Northeast and Southern divisions and transferred the related assets to its other operating locations, primarily in the Eagle Ford shale basin. Based on costs incurred in connection with the initial phases of the restructuring plan, the Company currently estimates the total costs of the plan to be approximately $0.8 million, $0.7 million of which the Company recorded in the quarter ended March 31, 2015. Additional costs are expected to be recorded in the second quarter of 2015 as they are incurred. The charges are characterized as "Other, net" in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2015. Such costs consisted of the following:
Severance and termination benefits
$
240

Contract termination costs and exit costs
443

Total restructuring and exit costs
$
683

Approximately $0.6 million of the total charge was recorded in the Southern operating segment while the remainder was recognized in the Northeast operating segment. The liability totaled approximately $0.5 million as of March 31, 2015 and is included as "Accrued liabilities" in the condensed consolidated balance sheet.

15


A rollforward of the restructuring and exit cost accruals through March 31, 2015 is as follows:
 
Employee Termination Costs (a)
 
Lease Exit Costs (b)
 
Other Exit Costs (c)
 
Total
Restructuring and exit costs accrued at December 31, 2014
$

 
$

 
$

 
$

Restructuring and exit-related costs
240

 
286

 
157

 
683

Cash payments
(78
)
 
(6
)
 
(71
)
 
(155
)
Restructuring and exit costs accrued at March 31, 2015
$
162

 
$
280

 
$
86

 
$
528

_____________________
(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 the Company.
(c)
Other exit costs include costs related to the movement of vehicles and rental fleet in connection with the exit from certain shale areas.
(9) Income Taxes
The following table shows the components of the income tax benefit for the periods indicated:
 
Three Months Ended
 
March 31,
 
2015
 
2014
Current income tax benefit
$
25

 
$

Deferred income tax (expense) benefit
(1
)
 
8,804

Total income tax benefit
$
24

 
$
8,804

The effective income tax benefit rate for the three months ended March 31, 2015 was 0.2% which differs from the federal statutory benefit rate of 35.0% primarily due to the increase in the valuation allowance on deferred tax assets resulting from current year losses. The effective income tax benefit rate for the three months ended March 31, 2014 was 42.5% which differs from the federal statutory rate of 35.0% primarily due to the tax impact of state taxes, nondeductible expenses, and income attributable to the minority shareholder of AWS.
The Company has significant deferred tax assets, consisting primarily of net operating losses (“NOLs”), which have a limited life, generally expiring between the years 2029 and 2035. Management regularly assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative losses incurred this year and in recent years. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future taxable income. In light of the Company’s continued losses, in 2014 the Company determined that its deferred tax liabilities (excluding deferred tax liabilities included in discontinued operations) were not sufficient to fully realize its deferred tax assets. Accordingly, a valuation allowance is required against the portion of its deferred tax assets that is not offset by deferred tax liabilities.
(10) Share-based Compensation
We may grant stock options, stock appreciation rights, restricted common stock and restricted stock units, performance shares and units, other stock-based awards and cash-based awards to our employees, directors, consultants and advisors pursuant to the Heckmann Corporation 2009 Equity Incentive Plan (as amended, the “2009 Plan”).
Stock Options
The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. During the three months ended March 31, 2015 and 2014 the Company granted 0.7 million and less than 0.1 million options pursuant to the 2009 Plan, respectively. Stock-based compensation cost is included in "General and administrative expenses" in the accompanying condensed consolidated statements of operations and totaled approximately $0.2 million and $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

16


Restricted Stock
The Company measures the cost of employee and board of director services received in exchange for awards of restricted stock, based on the market value of the Company’s common shares at the date of grant. During the three months ended March 31, 2015 and 2014, the Company did not grant any shares of restricted stock awards. During the three months ended March 31, 2015, the Company did not release any shares of restricted stock awards. During the three months ended March 31, 2014 the Company released less than 0.1 million shares of stock to certain employees upon the lapse of restrictions. Stock-based compensation expense for grants of restricted stock was approximately $0.1 million and $0.1 million for the three months ended March 31, 2015 and 2014, respectively. These amounts are included in "General and administrative expenses" in the accompanying condensed consolidated statements of operations.
Restricted Stock Units
The Company measures the cost of employee and board of director services received in exchange for awards of restricted stock units, based on the market value of the Company’s common shares at the date of grant. During the three months ended March 31, 2015 the Company granted 0.2 million restricted stock units. Stock-based compensation expense for grants of restricted stock units was $0.5 million for the three months ended March 31, 2015 which is included in "General and administrative expenses" in the accompanying condensed consolidated statements of operations. During the three months ended March 31, 2014 the Company granted 0.3 million shares of restricted stock units and stock-based compensation expense for such grants was $0.1 million for the three months ended March 31, 2014.
(11) Legal Matters
Environmental Liabilities
The Company is subject to the environmental protection and health and safety laws and related rules and regulations of the United States and of the individual states, municipalities and other local jurisdictions where we operate. The Company’s continuing operations are subject to rules and regulations promulgated by the Texas Railroad Commission, the Texas Commission on Environmental Quality, the Louisiana Department of Natural Resources, the Louisiana Department of Environmental Quality, the Ohio Department of Natural Resources, the Pennsylvania Department of Environmental Protection, the North Dakota Department of Health, the North Dakota Industrial Commission, Oil and Gas Division, the North Dakota State Water Commission, the Montana Department of Environmental Quality and the Montana Board of Oil and Gas, among others. These laws, rules and regulations address environmental, health and safety and related concerns, including water quality and employee safety. The Company has installed safety, monitoring and environmental protection equipment such as pressure sensors and relief valves, and have established reporting and responsibility protocols for environmental protection and reporting to such relevant local environmental protection departments as required by law.
Management believes the Company is in material compliance with all applicable environmental protection laws and regulations in the United States and the states in which the Company operates. The Company believes that there are no unrecorded liabilities as of the periods reported herein in connection with the Company’s compliance with applicable environmental laws and regulations. The condensed consolidated balance sheets at March 31, 2015 and December 31, 2014 included accruals totaling $0.5 million and $0.7 million, respectively, for various environmental matters, including the estimated costs to comply with a Louisiana Department of Environmental Quality requirement that the Company perform testing and monitoring at certain locations to confirm that prior pipeline spills were remediated in accordance with applicable requirements.
Litigation
There are various lawsuits, claims, investigations and proceedings that have been brought or asserted against the Company, which arise in the ordinary course of business, including actions with respect to securities and shareholder class actions, personal injury, vehicular and industrial accidents, commercial contracts, legal and regulatory compliance, securities disclosure, labor and employment, and employee benefits and environmental matters, the more significant of which are summarized below. The Company records a provision for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any provisions are reviewed at least quarterly and are adjusted to reflect the impact and status of settlements, rulings, advice of counsel and other information and events pertinent to a particular matter.
The Company believes that it has valid defenses with respect to legal matters pending against it. Based on its experience, the Company also believes that the damage amounts claimed in the lawsuits disclosed below are not necessarily a meaningful indicator of the Company’s potential liability. Litigation is inherently unpredictable, and it is possible that the Company’s results of operations or cash flow could be materially affected in any particular period by the resolution of one or more of the legal matters pending against it.

17


Texas Cases
On June 4, 2012, a lawsuit was commenced in the District Court of Dimmit County, Texas, alleging wrongful death in a case involving a vehicle accident. The accident occurred in May 2012 and involved a truck owned by our subsidiary Heckmann Water Resources (CVR), Inc. (“CVR”) and one other vehicle. The case is captioned Jose Luis Aguilar, Individually; Eudelia Aguilar, Individually; Vanessa Arce, Individually; Eudelia Aguilar and Vanessa Arce, as Personal Representatives of the Estate of Carlos Aguilar; Clarissa Aguilar, as Next Friend of Carlos Aguilar, Jr., Alyssa Nicole Aguilar, Andrew Aguilar, Marcus Aguilar, and Kaylee Aguilar; and Elsa Quinones as Next Friend of Karime and Carla Aguilar, Plaintiffs vs. Heckmann Water Resources (CVR), Inc. and Ruben Osorio Gonzalez, Defendants. On December 5, 2013, a jury verdict was rendered against CVR in the amount of $281.6 million, which amount was subsequently reduced to $163.8 million by the Dimmit County court when the judgment was entered on January 7, 2014 and then subsequently further reduced to $105.2 million when the judgment was amended by the Dimmit County court on April 1, 2014. On January 29, 2014, a separate lawsuit was commenced in the District Court of Dimmit County, Texas captioned Clarissa Aguilar, as Next Friend of Carlos Aguilar, Jr., Alyssa Nicole Aguilar, Andrew Aguilar, Marcus Aguilar, and Kaylee Aguilar v. Zurich American Insurance Company, Heckmann Water Resources (CVR), Inc., Heckmann Water Resources Corp., and Nuverra Environmental Solutions, Inc. f/k/a Heckmann Corp., Cause No. 14-01-12176-DCV, seeking a declaratory judgment that Nuverra Environmental Solutions, Inc. and Heckmann Water Resources Corp. are the alter egos of CVR, and therefore these entities are jointly and severally liable for the judgment against CVR in the wrongful death action.
In June 2014, the Company entered into agreements to fully settle all claims relating to the foregoing lawsuits. The settlements were approved by the Dimmit County court on July 15, 2014. In connection with the settlement of these matters, the Company agreed to fund $5.5 million of the total settlement payments to fully resolve the matter, which was subsequently paid in July 2014, with the remainder of the total settlement payment funded by the Company’s insurer. The amount of the total settlement payment is confidential pursuant to the settlement agreements. These settlement agreements include all plaintiffs and the Company’s insurer and release the Company and all of its subsidiaries from all past and future claims or liabilities related to these matters. As a result of the settlement of these cases, the Company recorded expenses totaling $7.8 million during the year ended December 31, 2014 consisting of $5.5 million for the settlement payments and $2.3 million of additional related legal expenses. This case is now closed.
Shareholder Litigation
2010 Class Action
On May 21, 2010, Richard P. Gielata, an individual purporting to act on behalf of stockholders, served a class action lawsuit filed May 6, 2010 against the Company and various directors and officers of the Company in the United States District Court for the District of Delaware captioned In re Heckmann Corporation Securities Class Action (Case No. 1:10-cv-00378-JJF-MPT). On March 4, 2014, the Company reached an agreement in principle to settle this matter by entering into a Stipulation of Settlement with the plaintiffs, which resolved all claims asserted against the Company and the individual defendants in this case. Under the terms of the Stipulation of Settlement, which was subject to approval by the court, the Company agreed to a cash payment of $13.5 million, a portion of which came come from remaining insurance proceeds, as well as the issuance of 0.8 million shares of its common stock. The Company agreed to provide a floor value of $13.5 million on the equity portion of the settlement; however, at the time of final court approval of the Stipulation of Settlement (described below) the equity value of the settlement consideration exceeded this amount and, as a result, the number of shares to be issued as settlement consideration was fixed at 0.8 million. Cash payments of $6.1 million from the Company, and the remaining $7.4 million from insurance proceeds, were deposited into escrow in April 2014. The Stipulation of Settlement was approved by the court on June 26, 2014 and became effective on August 27, 2014. Pursuant to the court’s approval order, one-third of the 0.8 million settlement shares and one-third of the cash settlement consideration were awarded to co-lead plaintiffs’ counsel as attorneys’ fees (in addition to reimbursement of certain court-approved expenses from the cash portion of the settlement escrow). The remaining two-thirds of the 0.8 million settlement shares were deposited into escrow on August 22, 2014.
2013 Class Action
In September 2013, two separate but substantially-similar putative class action lawsuits were commenced in Federal court against the Company and certain of its current and former officers and directors alleging that the Company and the individual defendants made certain material misstatements and/or omissions relating to the Company’s operations and financial condition which caused the price of its shares to fall. By order dated October 29, 2013, the two putative class actions were consolidated and a consolidated complaint was filed. Defendants filed a motion to dismiss these claims in May 2014, and such motion was granted by the Court on November 17, 2014, whereby the forgoing class action was dismissed without prejudice. Plaintiffs were permitted by the Court to file a motion to amend the complaint and did so on December 8, 2014. Defendants filed their opposition to plaintiffs' motion to amend the complaint on December 22, 2014. On March 12, 2015, the Court issued an order denying plaintiffs' motion to amend the complaint as to certain claims, but granting plaintiffs' motion as to other claims.

18


Plantiffs filed an amended complaint on March 19, 2015, and on March 23, 2015 the Company filed a motion to dismiss the amended complaint for failure to comply with the court’s March 12, 2015 order. Both parties have filed subsequent pleadings, and the Court has not yet ruled on the Company's motion to dismiss. The Company believes these claims are without merit and the Company will continue to vigorously defend itself and the individual defendants in this action.
2013 Derivative Cases
In September and October 2013, three separate but substantially-similar shareholder derivative lawsuits were commenced in Federal court against the Company and certain of its current and former officers and directors alleging that members of the Company’s board of directors failed to prevent the issuance of certain misstatements and omissions and asserting claims for breach of fiduciary duty, waste of corporate assets and unjust enrichment. Defendants filed a motion to dismiss these claims in February 2014. On September 15, 2014, the Court dismissed the consolidated cases following its dismissal of the consolidated complaint and plaintiffs' failure to amend. Also in October 2013, two identical shareholder derivative lawsuits were commenced in Arizona state court against the Company and certain of the Company’s current officers and directors alleging breach of fiduciary duty, waste of corporate assets and unjust enrichment. By order dated January 28, 2014, these two actions were consolidated, and defendants filed a motion to dismiss these claims in June 2014. On July 22, 2014, the parties filed a joint stipulation to dismiss these cases with prejudice, which was granted by the Court on August 1, 2014, and no settlement payment was made. In the first quarter of 2015, the Company received a written demand from one of the plaintiffs in the derivative lawsuits requesting that the Board of Directors commence an independent investigation of certain matters and take appropriate action to recover for the Company any damages to which it may be entitled as a result of alleged breaches of fiduciary duties by certain of its current and former officers and directors. Such investigation has been commenced and is ongoing.
AWS Arbitration Demand
On April 28, 2015, the holder of the non-controlling interest in AWS issued to the Company a Demand for Arbitration pursuant to the terms of the AWS operating agreement, relating to alleged breaches by the Company of certain of its obligations under the operating agreement. The Company believes these claims are without merit and intends to vigorously defend itself in this matter.
The Company does not expect that the outcome of other current claims and legal actions not discussed above will have a material adverse effect on its consolidated financial position, results of operations or cash flows.
(12) Related Party and Affiliated Company Transactions
There have been no significant changes to the related party transactions with Richard J. Heckmann, the former Executive Chairman of the Company’s board of directors, and Mark D. Johnsrud, the Company’s Chief Executive Officer and Chairman of the Company’s board of directors, for the use of an aircraft, apartment rentals, purchases of fresh water for resale and use of land where certain of the Company’s saltwater disposal wells are situated as described in Note 18 to the consolidated financial statements included in the Company’s 2014 Annual Report on Form 10-K.
(13) Segments
The Company evaluates business segment performance based on income (loss) before income taxes exclusive of corporate general and administrative costs and interest expense, which are not allocated to the segments. As described previously, during the three months ended September 30, 2014 the Company completed the organizational realignment of its shale solutions business into three operating divisions, which the Company considers to be operating and reportable segments of its continuing operations: (1) the Northeast division comprising the Marcellus and Utica Shale areas, (2) the Southern division comprising the Haynesville, Eagle Ford, Mississippian and Permian Basin Shale areas and (3) the Rocky Mountain division comprising the Bakken Shale area. Corporate/Other includes certain corporate costs and losses from discontinued operations, as well as assets held for sale and certain other corporate assets.
Financial information for the Company’s reportable segments related to continuing operations is presented below, including the Company's historical summary financial information for the three months ended March 31, 2014, which has been recast to conform to the new segment presentation.

19


 
Northeast
 
Southern
 
Rocky Mountain
 
Corporate/ Other
 
Total
Three months ended March 31, 2015
 
 
 
 
 
 
 
 
 
Revenue
$
27,313

 
$
22,389

 
$
69,410

 
$

 
$
119,112

Direct operating expenses
21,496

 
18,078

 
48,425

 

 
87,999

General and administrative expenses
1,904

 
2,078

 
2,056

 
6,662

 
12,700

Depreciation and amortization
3,927

 
4,648

 
8,737

 
170

 
17,482

Operating (loss) income
(98
)
 
(3,014
)
 
10,192

 
(6,832
)
 
248

Income (loss) from continuing operations before income taxes
13

 
(2,935
)
 
10,097

 
(19,194
)
 
(12,019
)
As of March 31, 2015
 
 
 
 
 
 
 
 
 
Total assets excluding those applicable to discontinued operations  (a)
94,616

 
161,214

 
425,250

 
64,039

 
745,119

Total assets held for sale

 

 

 
115,328

 
115,328

Three months ended March 31, 2014
 
 
 
 
 
 
 
 
 
Revenue
19,175

 
26,933

 
81,906

 

 
128,014

Direct operating expenses
16,425

 
21,607

 
57,347

 

 
95,379

General and administrative expenses
1,924

 
3,353

 
3,095

 
8,423

 
16,795

Depreciation and amortization
3,873

 
4,206

 
12,669

 
163

 
20,911

Operating (loss) income
(3,048
)
 
(2,232
)
 
8,795

 
(8,586
)
 
(5,071
)
(Loss) income from continuing operations before income taxes
(3,235
)
 
(2,667
)
 
8,683

 
(23,499
)
 
(20,718
)
As of December 31, 2014
 
 
 
 
 
 
 
 
 
Total assets excluding those applicable to discontinued operations  (a)
102,593

 
168,191

 
442,784

 
42,600

 
756,168

Total assets held for sale

 

 

 
115,404

 
115,404

_____________________
(a)    Total assets exclude intercompany receivables eliminated in consolidation.
(14) Assets Held for Sale and Discontinued Operations
The Company's industrial solutions operating and reportable segment, TFI, has been classified as discontinued operations since the sale process with various prospective acquirers began in fourth quarter of 2013. In February, 2015, Nuverra entered into a definitive agreement with Safety-Kleen, Inc. ("Safety-Kleen"), a subsidiary of Clean Harbors, Inc., whereby Safety-Kleen agreed to acquire TFI for $85.0 million in an all-cash transaction, subject to working capital adjustments.
On April 11, 2015, the Company and Safety-Kleen completed the TFI disposition as contemplated by the previously disclosed purchase agreement. Pursuant to the purchase agreement, $4.25 million of the purchase price was deposited into an escrow account to satisfy the Company’s indemnification obligations under the purchase agreement. Any remaining balance in the escrow account will be released to the Company eighteen (18) months following the closing date. Pursuant to the purchase agreement, the purchase price paid at closing was adjusted based upon an estimated working capital adjustment, which is subject to post-closing reconciliation, to reflect TFI’s actual working capital (calculated in accordance with the purchase agreement) on the closing date. After giving effect to the indemnity escrow, the estimated working capital adjustment and the payment of transaction fees and other expenses, the amount of net cash proceeds used to reduce the outstanding balance under the ABL Facility on the closing date was approximately $74.6 million. The post-closing working capital reconciliation may result in an increase or decrease in the Company’s final net cash proceeds.
The February 4, 2015 definitive agreement for the sale was for an amount that is below the carrying value of TFI's net assets. Based on the definitive agreement with Safety-Kleen, TFI recorded charges of approximately $74.4 million in the year ended December 31, 2014, reducing the estimated net recoverable value of its net assets to approximately $84.5 million at December 31, 2014. The charges were primarily related to a reduction of goodwill in the amount of $48.0 million, $26.4 million in intangible assets, as well as estimated additional transaction costs related to the sale. The Company may record additional charges based on the Company's final net cash proceeds and TFI's final net asset value.
The Company classified TFI as discontinued operations in its consolidated statements of operations for the three months ended March 31, 2015 and 2014. The assets and liabilities related to TFI are presented separately as "Assets held for sale" and "Liabilities of discontinued operations" in the Company’s condensed consolidated balance sheets at March 31, 2015 and December 31, 2014.     

20


The following table provides selected financial information of discontinued operations related to TFI:
 
Three Months Ended
 
March 31,
 
2015
 
2014
Revenue
$
17,497

 
$
27,645

Income from discontinued operations before income taxes
$
1,186

 
$
2,155

Income tax expense
(265
)
 
(1,696
)
Income from discontinued operations
$
921

 
$
459

The carrying value of the assets and liabilities of TFI that are classified as held for sale in the accompanying condensed consolidated balance sheets at March 31, 2015 and December 31, 2014 are as follows:
 
March 31,
 
December 31,
 
2015
 
2014
Assets:
 
 
 
Cash and cash equivalents
$
2,793

 
$
2,049

Accounts receivable, net
11,869

 
13,592

Inventories, net
1,530

 
2,011

Prepaid expenses and other receivables
1,243

 
2,545

Other current assets
276

 
269

Total current assets held for sale
17,711

 
20,466

Property, plant and equipment, net
28,548

 
28,366

Intangible assets, net
69,069

 
66,572

Total long-term assets held for sale
97,617

 
94,938

Total assets held for sale
$
115,328

 
$
115,404

Liabilities:
 
 
 
Accounts payable
$
2,757

 
$
4,544

Accrued expenses
4,104

 
4,214

Current portion of long-term debt
63

 
44

Total current liabilities of discontinued operations
6,924

 
8,802

Long-term portion of debt
80

 
61

Long-term liabilities of discontinued operations - deferred income taxes
22,252

 
22,044

Total liabilities of discontinued operations
29,256

 
30,907

Net assets held for sale
$
86,072

 
$
84,497


(15) Subsidiary Guarantors
The obligations of the Company under the 2018 Notes are jointly and severally, fully and unconditionally guaranteed by certain of the Company’s subsidiaries. Pursuant to the terms of the indenture governing the 2018 Notes (the “Indenture”), the guarantees are full and unconditional, but are subject to release under the following circumstances:
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 the Company designates any restricted subsidiary that is a subsidiary guarantor to be an unrestricted subsidiary; or
upon legal defeasance or the discharge of the Company’s obligations under the Indenture.
Although the guarantees are subject to release under the above described circumstances, we have concluded they are still deemed full and unconditional for purposes of Rule 3-10 of Regulation S-X because these circumstances are customary, and

21


accordingly, the Company concluded that it may rely on Rule 3-10 of Regulation S-X, as the other requirements of Rule 3-10 have been met.
The following tables present consolidating financial information for Nuverra Environmental Solutions, Inc. (“Parent”), certain 100% wholly-owned subsidiaries (the “Guarantor Subsidiaries”) and AWS, a 51% owned subsidiary (the “Non-Guarantor Subsidiary”), as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014. These condensed consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the Company’s condensed consolidated financial statements. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2015
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiary
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
34,639

 
$
(831
)
 
$
1,678

 
$

 
$
35,486

Restricted cash

 

 

 

 

Accounts receivable, net

 
85,178

 
1,215

 

 
86,393

Deferred income taxes
33

 
3,000

 

 

 
3,033

Other current assets
2,415

 
7,297

 
20

 

 
9,732

Current assets held for sale

 
17,711

 

 

 
17,711

Total current assets
37,087

 
112,355

 
2,913

 

 
152,355

Property, plant and equipment, net
2,913

 
453,173

 
10,328

 

 
466,414

Equity investments
258,177

 
624

 

 
(255,008
)
 
3,793

Intangible assets, net

 
17,933

 
1,113

 

 
19,046

Goodwill

 
104,721

 

 

 
104,721

Other
433,629

 
29,045

 
41

 
(446,214
)
 
16,501

Long-term assets held for sale

 
97,617

 

 

 
97,617

TOTAL ASSETS
$
731,806

 
$
815,468

 
$
14,395

 
$
(701,222
)
 
$
860,447

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Accounts payable
$
946

 
$
12,920

 
$
252

 
$

 
$
14,118

Accrued expenses
25,458

 
27,555

 
203

 

 
53,216

Current portion of contingent consideration

 
9,409

 

 

 
9,409

Current portion of long-term debt

 
5,128

 
11,000

 

 
16,128

Current liabilities of discontinued operations

 
6,924

 

 

 
6,924

Total current liabilities
26,404

 
61,936

 
11,455

 

 
99,795

Deferred income taxes
(33,492
)
 
36,795

 

 

 
3,303

Long-term portion of debt
575,902

 
11,256

 

 

 
587,158

Long-term portion of contingent consideration

 
106

 

 

 
106

Other long-term liabilities
19,113

 
430,975

 

 
(446,214
)
 
3,874

Long-term liabilities of discontinued operations

 
22,332

 

 

 
22,332

Total shareholders' equity
143,879

 
252,068

 
2,940

 
(255,008
)
 
143,879

TOTAL LIABILITIES AND EQUITY
$
731,806

 
$
815,468

 
$
14,395

 
$
(701,222
)
 
$
860,447


22


CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiary
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
13,801

 
$
(1,706
)
 
$
1,272

 
$

 
$
13,367

Restricted cash

 
114

 

 

 
114

Accounts receivable, net

 
107,931

 
882

 

 
108,813

Deferred income taxes
173

 
3,006

 

 

 
3,179

Other current assets
738

 
7,972

 
23

 

 
8,733

Current assets held for sale

 
20,466

 

 

 
20,466

Total current assets
14,712

 
137,783

 
2,177

 

 
154,672

Property, plant and equipment, net
3,263

 
462,193

 
10,526

 

 
475,982

Equity investments
249,426

 
645

 

 
(246,257
)
 
3,814

Intangible assets, net

 
18,607

 
1,150

 

 
19,757

Goodwill

 
104,721

 

 

 
104,721

Other
453,048

 
11,208

 

 
(446,568
)
 
17,688

Long-term assets held for sale

 
94,938

 

 

 
94,938

TOTAL ASSETS
$
720,449

 
$
830,095

 
$
13,853

 
$
(692,825
)
 
$
871,572

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Accounts payable
$
1,310

 
$
17,294

 
$
255

 
$

 
$
18,859

Accrued expenses
16,404

 
26,813

 
178

 

 
43,395

Current portion of contingent consideration

 
9,274

 

 

 
9,274

Current portion of long-term debt

 
4,863

 
11,000

 

 
15,863

Current liabilities of discontinued operations

 
8,802

 

 

 
8,802

Total current liabilities
17,714

 
67,046

 
11,433

 

 
96,193

Deferred income taxes
(33,353
)
 
36,801

 

 

 
3,448

Long-term portion of debt
582,446

 
10,009

 

 

 
592,455

Long-term portion of contingent consideration

 
550

 

 

 
550

Other long-term liabilities
695

 
449,325

 
422

 
(446,568
)
 
3,874

Long-term liabilities of discontinued operations

 
22,105

 

 

 
22,105

Total shareholders' equity
152,947

 
244,259

 
1,998

 
(246,257
)
 
152,947

TOTAL LIABILITIES AND EQUITY
$
720,449

 
$
830,095

 
$
13,853

 
$
(692,825
)
 
$
871,572


23


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2015
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiary
 
Eliminations
 
Consolidated
Revenue
$

 
$
117,072

 
$
2,040

 
$

 
$
119,112

Costs and expenses:
 
 
 
 
 
 
 
 
 
Direct operating expenses

 
87,163

 
836

 

 
87,999

General and administrative expenses
6,662

 
6,014

 
24

 

 
12,700

Depreciation and amortization
170

 
17,076

 
236

 

 
17,482

Impairment of goodwill

 

 

 

 

Other, net

 
683

 

 

 
683

Total costs and expenses
6,832

 
110,936

 
1,096

 

 
118,864

Operating (loss) income
(6,832
)
 
6,136

 
944

 

 
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
)
 
6,231

 
944

 
(8,083
)
 
(12,019
)
Income tax benefit (expense)
37

 
(13
)
 

 

 
24

(Loss) income from continuing operations
(11,074
)
 
6,218

 
944

 
(8,083
)
 
(11,995
)
Income from discontinued operations, net of income taxes

 
921

 

 

 
921

Net (loss) income attributable to common stockholders
$
(11,074
)
 
$
7,139

 
$
944

 
$
(8,083
)
 
$
(11,074
)

THREE MONTHS ENDED MARCH 31, 2014
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiary
 
Eliminations
 
Consolidated
Revenue
$

 
$
127,810

 
$
204

 
$

 
$
128,014

Costs and expenses:
 
 
 
 
 
 
 
 
 
Direct operating expenses

 
95,049

 
330

 

 
95,379

General and administrative expenses
8,423

 
8,354

 
18

 

 
16,795

Depreciation and amortization
163

 
20,550

 
198

 

 
20,911

Total costs and expenses
8,586

 
123,953

 
546

 

 
133,085

Operating (loss) income
(8,586
)
 
3,857

 
(342
)
 

 
(5,071
)
Interest expense, net
(11,736
)
 
(314
)
 

 

 
(12,050
)
Other expense, net

 
(412
)
 

 

 
(412
)
Income (loss) from equity investments
1,776

 
(8
)
 

 
(1,776
)
 
(8
)
Loss on extinguishment of debt
(3,177
)
 

 

 

 
(3,177
)
(Loss) income from continuing operations before income taxes
(21,723
)
 
3,123

 
(342
)
 
(1,776
)
 
(20,718
)
Income tax benefit (expense)
10,268

 
(1,464
)
 

 

 
8,804

(Loss) income from continuing operations
(11,455
)
 
1,659

 
(342
)
 
(1,776
)
 
(11,914
)
Income from discontinued operations, net of income taxes

 
459

 

 

 
459

Net (loss) income attributable to common stockholders
$
(11,455
)
 
$
2,118

 
$
(342
)
 
$
(1,776
)
 
$
(11,455
)


24


UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2015
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiary
 
Consolidated
Net cash provided by operating activities from continuing operations
$
27,658

 
$
6,686

 
$
406

 
$
34,750

Net cash provided by operating activities from discontinued operations

 
867

 

 
867

Net cash provided by operating activities
27,658

 
7,553

 
406

 
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 notes payable and capital leases

 
(1,361
)
 

 
(1,361
)
Payments of contingent consideration and other financing activities
(75
)
 

 


 
(75
)
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

 
1,619

 
406

 
22,863

Cash and cash equivalents - beginning of period
13,801

 
343

 
1,272

 
15,416

Cash and cash equivalents - end of period
34,639

 
1,962

 
1,678

 
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

 
$
(831
)
 
$
1,678

 
$
35,486


25


UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2014
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiary
 
Consolidated
Net cash (used in) provided by operating activities from continuing operations
$
(12,990
)
 
$
12,052

 
$
565

 
$
(373
)
Net cash provided by operating activities from discontinued operations

 
3,409