Nuverra Environmental Solutions, Inc. - 10-K filing on 2014-03-10

Subsidiary Guarantors

12 Months Ended

Dec. 31, 2013

(22) Subsidiary Guarantors

The obligations of Nuverra Environmental Solutions, Inc. under the 2018 Notes are jointly and severally, fully and unconditionally guaranteed by certain of the Company’s subsidiaries. The following tables present consolidating financial information for Nuverra Environmental Solutions, Inc. (“Parent”), certain 100% wholly-owned subsidiaries (the “Guarantor Subsidiaries”) and Appalachian Water Services, LLC, a 51% owned subsidiary (the “Non-Guarantor Subsidiary”), as of December 31, 2013 and December 31, 2012 and for the years ended December 31, 2013, 2012 and 2011. These condensed consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the Company’s consolidated financial statements. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2013

(In thousands)


	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiary		Eliminations			Consolidated
ASSETS
Current Assets
Cash and cash equivalents	$	3,839		$	3,201	$	1,743	$	—		$	8,783
Restricted cash		—			110		—		—			110
Accounts receivable—net		—			86,256		830		—			87,086
Other current assets		33,809			10,371		86		—			44,266
Current assets held for sale		—			21,446		—		—			21,446

Total current assets		37,648			121,384		2,659		—			161,691

Property, plant and equipment, net		2,396			485,586		10,559		—			498,541
Equity investments		742,342			650		—		(738,960	)		4,032
Intangible assets, net		—			148,063		1,300		—			149,363
Goodwill		—			398,024		10,672		—			408,696
Other		410,774			120,786		—		(510,424	)		21,136
Long-term assets held for sale		—			167,304		—		—			167,304

TOTAL ASSETS	$	1,193,160		$	1,441,797	$	25,190	$	(1,249,384	)	$	1,410,763

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,784		$	27,850	$	1,595	$	—		$	33,229
Accrued expenses		43,274			19,941		216		—			63,431
Current portion of contigent consideration		—			13,113		—		—			13,113
Current portion of long-term debt		—			5,464		—		—			5,464
Current liabilities of discontinued operations		—			9,301		—		—			9,301

Total current liabilities		47,058			75,669		1,811		—			124,538

Deferred income taxes		(34,275	)		77,257		—		—			42,982
Long-term debt, less current portion		535,221			14,492		—		—			549,713
Long-term contingent consideration		—			2,344		—		—			2,344
Other long-term liabilities		787			513,961		10,104		(510,424	)		14,428
Long-term liabilities of discontinued operations		—			32,389		—		—			32,389
Total shareholders equity		644,369			725,685		13,275		(738,960)			644,369

TOTAL LIABILITIES AND EQUITY	$	1,193,160		$	1,441,797	$	25,190	$	(1,249,384	)	$	1,410,763

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2012

(In thousands)


	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiary		Eliminations			Consolidated
ASSETS
Current Assets
Cash and cash equivalents	$	5,819		$	8,101	$	856	$	—		$	14,776
Restricted cash		—			3,536		—		—			3,536
Accounts receivable—net		—			102,867		760		—			103,627
Other current assets		10,509			13,117		2		—			23,628
Current assets held for sale		—			20,324		—		—			20,324

Total current assets		16,328			147,945		1,618		—			165,891

Property, plant and equipment, net		44			569,445		9,533		—			579,022
Equity investments		901,411			597		—		(893,729	)		8,279
Intangible assets, net		—			172,426		1,450		—			173,876
Goodwill		—			404,732		10,444		—			415,176
Other		475,829			149,045		—		(599,364	)		25,510
Long-term assets held for sale		—			276,585		—		—			276,585

TOTAL ASSETS	$	1,393,612		$	1,720,775	$	23,045	$	(1,493,093	)	$	1,644,339

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	757		$	22,429	$	215	$	—		$	23,401
Accrued expenses		17,833			28,651		62		—			46,546
Current portion of contingent consideration		—			1,568		—		—			1,568
Current portion of long-term debt		—			4,699		—		—			4,699
Current liabilities of discontinued operations		—			10,256		—		—			10,256

Total current liabilities		18,590			67,603		277		—			86,470

Deferred income taxes		(46,161	)		134,557		—		—			88,396
Long-term debt, less current portion		546,079			15,348		—		—			561,427
Long-term contingent consideration		—			7,363		1,500		—			8,863
Other long-term liabilities		27,343			573,826		9,021		(599,364	)		10,826
Long-term liabilities of discontinued operations		—			40,596		—		—			40,596
Total shareholders equity		847,761			881,482		12,247		(893,729	)		847,761

TOTAL LIABILITIES AND EQUITY	$	1,393,612		$	1,720,775	$	23,045	$	(1,493,093	)	$	1,644,339

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)


2013	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Revenue	$	—		$	520,922		$	4,894		$	—	$	525,816
Cost of revenues		—			(453,609	)		(2,558	)		—		(456,167	)

Gross profit		—			67,313			2,336			—		69,649
Selling, general and administrative expenses		50,437			56,746			225			—		107,408
Long-lived asset impairment		—			111,900			—			—		111,900

(Loss) income from operations		(50,437	)		(101,333	)		2,111			—		(149,659	)
Interest expense, net		(51,318	)		(1,303	)		(1,082	)		—		(53,703	)
Loss on extinguishment of debt		—			—			—			—		—
(Loss) income from equity investment		(161,203	)		54			—			161,203		54
Other (loss) income		(5,292	)		(35	)		1,500			—		(3,827	)

Loss from continuing operations before income taxes		(268,250	)		(102,617	)		2,529			161,203		(207,135	)
Income tax benefit (expense)		35,959			37,136			—			—		73,095

(Loss) gain from continuing operations		(232,291	)		(65,481	)		2,529			161,203		(134,040	)
Loss from discontinued operations, net of income taxes		—			(98,251	)		—			—		(98,251	)

Net (loss) income attributable to common stockholders	$	(232,291	)	$	(163,732	)	$	2,529		$	161,203	$	(232,291	)

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)


2012	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Revenue	$	—		$	255,263		$	1,408		$	—	$	256,671
Cost of revenues		—			(237,048	)		(914	)		—		(237,962	)

Gross profit		—			18,215			494			—		18,709
Selling, general and administrative expenses		17,362			32,807			84			—		50,253
Long-lived asset impairment		—			6,030			—			—		6,030

(Loss) income from operations		(17,362	)		(20,622	)		410			—		(37,574	)
Interest expense, net		(25,200	)		(1,155	)		(252	)		—		(26,607	)
Loss on extinguishment of debt		(2,638	)		—			—			—		(2,638	)
(Loss) income from equity investment		(5,701	)		12			—			5,701		12
Other (loss) income		(920	)		(1,630	)		—			—		(2,550	)

(Loss) income from continuing operations before income taxes		(51,821	)		(23,395	)		158			5,701		(69,357	)
Income tax benefit (expense)		54,348			8,412			—			—		62,760

(Loss) income from continuing operations		2,527			(14,983	)		158			5,701		(6,597	)
Income from discontinued operations, net of income taxes		—			9,124			—			—		9,124

Net (loss) income attributable to common stockholders	$	2,527		$	(5,859	)	$	158		$	5,701	$	2,527

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)


2011	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Revenue	$	—		$	156,837		$	—		$	—	$	156,837
Cost of revenues		—			(123,509	)		—			—		(123,509	)

Gross profit		—			33,328			—			—		33,328
Selling, general and administrative expenses		11,061			25,590			—			—		36,651
Pipeline start-up and commissioning		—			2,089			—			—		2,089

(Loss) gain from operations		(11,061	)		5,649			—			—		(5,412	)
Interest expense, net		(2,437	)		(1,806	)		—			—		(4,243	)
Gain (loss) from equity investment		(13,416	)		(462	)		—			13,416		(462	)
Other income		131			6,101			—			—		6,232

(Loss) income from continuing operations before income taxes		(26,783	)		9,482			—			13,416		(3,885	)
Income tax benefit		3,777			—			—			—		3,777

(Loss) income from continuing operations		(23,006	)		9,482			—			13,416		(108	)
Loss from discontinued operations, net of income taxes		—			—			(22,898	)		—		(22,898	)

Net (loss) income attributable to common stockholders	$	(23,006	)	$	9,482		$	(22,898	)	$	13,416	$	(23,006	)

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)


2013	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Net income (loss) attributable to common stockholders	$	(232,291	)	$	(163,732	)	$	2,529		$	161,203	$	(232,291	)
Total other comprehensive income (loss), net of tax		—			—			—			—		—

Comprehensive income (loss), net of tax	$	(232,291	)	$	(163,732	)	$	2,529		$	161,203	$	(232,291	)


2012
Net income (loss) attributable to common stockholders	$	2,527		$	(5,859	)	$	158		$	5,701	$	2,527
Add back: income attributable to noncontrolling interest		—			—			—			—		—

Net income (loss)		2,527			(5,859	)		158			5,701		2,527

Other comprehensive loss, net of tax:
Reclassification of net gains from sales of available for sale securities included in earnings		(8	)		—			—			—		(8	)

Total other comprehensive loss, net of tax		(8	)		—			—			—		(8	)

Comprehensive income (loss), net of tax	$	2,519		$	(5,859	)	$	158		$	5,701	$	2,519


2011
Net (loss) income attributable to common stockholders	$	(23,006	)	$	9,482		$	(22,898	)	$	13,416	$	(23,006	)
Add back: income attributable to noncontrolling interest		(1,456	)		—			(1,456	)		1,456		(1,456	)

Net income (loss)		(24,462	)		9,482			(24,354	)		14,872		(24,462	)

Other comprehensive loss, net of tax:
Foreign currency translation gain (loss)		21			—			—			—		21
Reclassification of net gains from sales of available for sale securities included in earnings		(112	)		—			—			—		(112	)

Total other comprehensive loss, net of tax		(91	)		—			—			—		(91	)

Comprehensive (loss) income, net of tax	$	(24,553	)	$	9,482		$	(24,354	)	$	14,872	$	(24,553	)

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2013

(In thousands)


	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Net cash provided by operating activities from continuing operations	$	20,693		$	43,458		$	2,517		$	—	$	66,668
Net cash provided by operating activities from discontinued operations		—			3,589			—			—		3,589

Net cash provided by operating activities		20,693			47,047			2,517			—		70,257
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired		(10,570	)		—			—			—		(10,570	)
Proceeds from the sale of property and equipment		—			2,308			—			—		2,308
Purchase of property, plant and equipment		(1,597	)		(43,366	)		(1,630	)		—		(46,593	)
Other investing activities		2,067			—			—			—		2,067

Net cash used in investing activities from continuing operations		(10,100	)		(41,058	)		(1,630	)		—		(52,788	)
Net cash used in investing activities from discontinuing operations		—			(4,195	)		—			—		(4,195	)

Net cash used in investing activities		(10,100	)		(45,253	)		(1,630	)		—		(56,983	)
Cash flows from financing activities:
Proceeds from revolving credit facility		98,501			—			—			—		98,501
Payments on revolving credit facility		(109,501	)		—			—			—		(109,501	)
Payments for deferred financing costs		(855	)		—			—			—		(855	)
Payments on notes payable and capital leases		—			(5,416	)		—			—		(5,416	)
Payments of contingent consideration		—			(1,884	)		—			—		(1,884	)
Other financing activities		(718	)		—			—			—		(718	)

Net cash used in financing activities from continuing operations		(12,573	)		(7,300	)		—			—		(19,873	)
Net cash used in financing activities from discontinued operations		—			(400	)		—			—		(400	)

Net cash used in financing activities		(12,573	)		(7,700	)		—			—		(20,273	)
Net (decrease) increase in cash		(1,980	)		(5,906	)		887			—		(6,999	)
Cash and cash equivalents—beginning of period		5,819			9,536			856			—		16,211

Cash and cash equivalents—end of period		3,839			3,630			1,743			—		9,212
Less: cash and cash equivalents of discontinued operations at year end		—			(429	)		—			—		(429	)

Cash and cash equivalents of continuing operations at year end	$	3,839		$	3,201		$	1,743		$	—	$	8,783

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2012

(In thousands)


	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Net cash (used in) provided by operating activities from continuing operations	$	(23,119	)	$	47,301		$	896		$	—	$	25,078
Net cash provided by operating activities from discontinued operations		—			5,593			—			—		5,593

Net cash (used in) provided by operating activities		(23,119	)		52,894			896			—		30,671
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired		(359,456	)		2,110			—			—		(357,346	)
Proceeds from the sale of property and equipment		—			7,235			—			—		7,235
Purchase of property, plant and equipment		(41	)		(43,466	)		(9	)		—		(43,516	)
Proceeds from available for sale securities		5,169			—			—			—		5,169
Other investing activities		—			(51	)		(31	)		—		(82	)

Net cash used in investing activities from continuing operations		(354,328	)		(34,172	)		(40	)		—		(388,540	)
Net cash used in investing activities from discontinuing operations		—			(4,158	)		—			—		(4,158	)

Net cash used in investing activities		(354,328	)		(38,330	)		(40	)		—		(392,698	)
Cash flows from financing activities:
Proceeds from revolving credit facility		193,490			—			—			—		193,490
Payments on revolving credit facility		(186,674	)		—			—			—		(186,674	)
Proceeds from other debt		398,980			—			—			—		398,980
Payments on other debt		(150,367	)		—			—			—		(150,367	)
Proceeds from equity offering		76,048			(1,600	)		—			—		74,448
Payments for deferred financing costs		(26,170	)		—			—			—		(26,170	)
Payments on notes payable and capital leases		—			(4,605	)		—			—		(4,605	)
Payments of contingent consideration		(1,000	)		—			—			—		(1,000	)
Other financing activities		(569	)		511			—			—		(58	)

Net cash provided by (used in) financing activities from continuing operations		303,738			(5,694	)		—			—		298,044
Net cash provided by (used in) financing activities from discontinued operations		—			—			—			—		—

Net cash provided by (used in) financing activities		303,738			(5,694	)		—			—		298,044
Net (decrease) increase in cash		(73,709	)		8,870			856			—		(63,983	)
Cash and cash equivalents—beginning of period		79,528			666			—			—		80,194

Cash and cash equivalents—end of period		5,819			9,536			856			—		16,211
Less: cash and cash equivalents of discontinued operations at year end		—			(1,435	)		—			—		(1,435	)

Cash and cash equivalents of continuing operations at year end	$	5,819		$	8,101		$	856		$	—	$	14,776

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2011

(In thousands)


	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations		Consolidated
Net cash (used in) provided by operating activities from continuing operations	$	(158,684	)	$	149,405		$	—		$	—	$	(9,279	)
Net cash used in operating activities from discontinued operations		—			—			(4,683	)		—		(4,683	)

Net cash (used in) provided by operating activities		(158,684	)		149,405			(4,683	)		—		(13,962	)
Cash flows from investing activities
Cash paid for acquisitions, net of cash acquired		(88,544	)		210			—			—		(88,334	)
Purchase of property, plant and equipment		(299	)		(150,622	)		—			—		(150,921	)
Purchases of available for sale securities		(34,947	)		—			—			—		(34,947	)
Proceeds from available for sale securities		120,062			—			—			—		120,062
Proceeds from the sale of certificates of deposits		11,830			—			—			—		11,830
Other investing activities		(16	)		—			—			—		(16	)

Net cash provided by (used in) investing activities from continuing operations		8,086			(150,412	)		—			—		(142,326	)
Net cash used in investing activities from discontinuing operations		—			—			(5,777	)		—		(5,777	)

Net cash provided by (used in) investing activities		8,086			(150,412	)		(5,777	)		—		(148,103	)
Cash flows from financing activities
Proceeds from revolving credit facility		72,799			—			—			—		72,799
Proceeds from other debt		109,885			—			—			—		109,885
Payments on other debt		(73,914	)		—			—			—		(73,914	)
Cash proceeds from the exercise of warrants		47,912			—			—			—		47,912
Payments for deferred financing costs		(2,764	)		—			—			—		(2,764	)
Cash paid to purchase treasury stock		(4,414	)		—			—			—		(4,414	)
Other financing activities		1,488			55			—			—		1,543

Net cash provided by financing activities from continuing operations		150,992			55			—			—		151,047
Net cash provided by financing activities from discontinued operations		—			—			—			—		—

Net cash provided by financing activities		150,992			55			—			—		151,047
Net increase (decrease) increase in cash		394			(952	)		(10,460	)		—		(11,018	)
Cash and cash equivalents—beginning of period		79,134			1,618			10,460			—		91,212

Cash and cash equivalents—end of period	$	79,528		$	666		$	—		$	—	$	80,194