NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying condensed consolidated financial statements of Nuverra Environmental Solutions, Inc. and its subsidiaries (collectively, “Nuverra,” the “Company,” “we,” “us,” or “our”) are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Our condensed consolidated balance sheet as of December 31, 2020, included herein, has been derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (or “GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, the condensed consolidated financial statements include the normal, recurring adjustments necessary for the fair statement of the results for the interim periods. These financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, contained in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 16, 2021 (the “2020 Annual Report on Form 10-K”).
All dollar and share amounts in the footnote tabular presentations are in thousands, except per share amounts and unless otherwise noted.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates.
There have been no other material changes or developments in our significant accounting policies or evaluation of accounting estimates and underlying assumptions or methodologies from those disclosed in our 2020 Annual Report on Form 10-K.
Restricted Cash
On November 16, 2020, we entered into a Loan Agreement (the “Master Loan Agreement”) with First International Bank & Trust, a North Dakota banking corporation (the “Lender”), for: (i) a $13.0 million equipment term loan (the “Equipment Loan”); (ii) a $10.0 million real estate term loan (the “CRE Loan”); (iii) a $5.0 million operating line of credit (the “Operating LOC Loan”); and (iv) a $4.839 million letter of credit facility (the “Letter of Credit Facility”), which collectively may be referred to as the “Loans”. The Letter of Credit Facility was amended on January 25, 2021, in order to increase by $510,000 the maximum availability thereunder, for up to $5.349 million. The Master Loan Agreement also required the Company deposit into a reserve account held by the Lender (the “Reserve Account”) the sum of $2.5 million and make additional monthly deposits of $100,000 into the Reserve Account. In connection with the closing of the Loans, the Company repaid all outstanding obligations in full under (a) our First Lien Credit Agreement (the “First Lien Credit Agreement”), by and among the lenders party thereto, ACF FinCo I, LP, as administrative agent, and the Company and (b) our Second Lien Term Loan Agreement (the “Second Lien Term Loan Agreement”) by and among the lenders party thereto, Wilmington Savings Fund Society, FSB, as administrative agent, and the Company, totaling $12.6 million and $8.3 million, respectively. Funds held in the Reserve Account are not accessible by the Company and are pledged as additional security for the CRE Loan, the Operating LOC Loan and the Letter of Credit Facility. We had a restricted cash balance of $3.0 million and $2.8 million as of March 31, 2021 and December 31, 2020, respectively.
Fair Value Measurements
Fair value represents an exit price, representing the amount that would be received from the sale of 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.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We adopted this Topic 740 on January 1, 2021. The adoption of the new tax standard did not have a material effect on our consolidated financial statements.
Note 2 - Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). Due to the issuance of ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and the fact that we are a smaller reporting company, the new standard is effective for reporting periods beginning after December 15, 2022. The standard replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We plan to adopt the new credit loss standard effective January 1, 2023. We do not expect the new credit loss standard to have a material effect on our consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met. ASU No. 2020-04 only applies to contracts and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The new standard is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of the new reference rate reform practical expedient will have on our consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815–40). ASU No. 2020-06 simplifies the accounting for certain convertible instruments, amends the guidance for the derivatives scope exception for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. The standard may be adopted using either a retrospective or modified retrospective method. The new standard will be effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We do not expect the adoption of the new standard to have a material effect on our consolidated financial statements.
Note 3 - Revenues
Revenues are generated upon the performance of contracted services under formal and informal contracts with customers. Revenues are recognized when the contracted services for our customers are completed in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Sales and usage-based taxes are excluded from revenues. Payment is due when the contracted services are completed in accordance with the payment terms established with each customer prior to providing any services. As such, there is no significant financing component for any of our revenues.
Some of our contracts with customers involve multiple performance obligations as we are providing more than one service under the same contract, such as water transport services and disposal services. However, our core service offerings are capable of being distinct and also are distinct within the context of contracts with our customers. As such, these services represent separate performance obligations when included in a single contract. We have standalone pricing for all of our services which is negotiated with each of our customers in advance of providing the service. The contract consideration is allocated to the individual performance obligations based upon the standalone selling price of each service, and no discount is offered for a bundled services offering.
Contract Assets
There was no contract asset recorded on the consolidated balance sheets as of March 31, 2021 and December 31, 2020.
Disaggregated Revenues
The following tables present our revenues disaggregated by revenue source for each reportable segment for the three months ended March 31, 2021 and March 31, 2020:
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Three months ended March 31, 2021
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Rocky Mountain
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Northeast
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Southern
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Corporate/Other
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Total
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Water Transport Services
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$
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9,570
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$
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5,390
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$
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2,107
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$
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—
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$
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17,067
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Disposal Services
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1,353
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1,750
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1,453
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—
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4,556
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Other Revenue
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542
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151
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10
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—
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703
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Total Service Revenue
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11,465
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7,291
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|
3,570
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—
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22,326
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Rental Revenue
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1,324
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15
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—
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—
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1,339
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Total Revenue
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$
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12,789
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$
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7,306
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$
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3,570
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$
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—
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$
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23,665
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Three months ended March 31, 2020
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Rocky Mountain
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Northeast
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Southern
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Corporate/Other
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Total
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Water Transport Services
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$
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14,314
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$
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7,144
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$
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2,256
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$
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—
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$
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23,714
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Disposal Services
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3,856
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2,163
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2,346
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—
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8,365
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Other Revenue
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1,866
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452
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74
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—
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2,392
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Total Service Revenue
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20,036
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9,759
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4,676
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—
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34,471
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Rental Revenue
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3,432
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35
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4
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—
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3,471
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Total Revenue
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$
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23,468
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$
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9,794
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$
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4,680
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$
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—
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$
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37,942
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Water Transport Services
The majority of our revenues are from the removal and disposal of produced water and flowback water originating from oil and natural gas wells or the transportation of fresh water and produced water to customer sites for use in drilling and hydraulic fracturing activities by trucks or through temporary or permanent water transfer pipelines. Water transport rates for trucking are based upon either a fixed fee per barrel or upon an hourly rate. Revenue is recognized once the water has been transported, or over time, based upon the number of barrels transported or disposed of, or at the agreed upon hourly rate, depending upon the customer contract. Contracts for the use of our water disposal pipeline are priced at a fixed fee per disposal barrel transported, with revenues recognized over time from when the water is injected into our pipeline until the transport is complete. Water transport services are all generally completed within 24 hours with no remaining performance obligation outstanding at the end of each month.
Disposal Services
Revenues for disposal services are generated through fees charged for disposal of fluids near disposal wells and disposal of oilfield wastes in our landfill. Disposal rates are generally based on a fixed fee per barrel of produced water, or on a per ton basis for landfill disposal, with revenues recognized once the disposal has occurred. The performance obligation for disposal services is considered complete once the disposal occurs. Therefore, disposal services revenues are recognized at a point in time.
Other Revenue
Other revenue includes revenues from the sale of “junk” or “slop” oil obtained through the skimming of disposal water. Revenue is recognized for “junk” or “slop” oil sales at a point in time once the goods are transferred.
Rental Revenue
We generate rental revenue from the rental of equipment used in wellsite services. Rental rates are based upon negotiated rates with our customers and revenue is recognized over the rental service period. Revenues from rental equipment are not within the scope of the new revenue standard, but rather are recognized under ASC 842, Leases. As the rental service period for our equipment is very short term in nature and does not include any sales-type or direct financing leases, nor any variable rental components, the adoption of ASC 842 in 2019 did not have a material impact upon our consolidated statement of operations.
Note 4 - Leases
We lease vehicles, transportation equipment, real estate and certain office equipment. We determine if an arrangement is a lease at inception. Operating and finance lease assets represent our right to use an underlying asset for the lease term, and operating and finance lease liabilities represent our obligation to make lease payments arising from the lease. Operating and finance lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term. Absent a documented borrowing rate from the lessor, we use our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments.
Most of our leases have remaining lease terms of one year to 14 years, with one lease having a term of 99 years. Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with an initial term of twelve months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis. Some of our vehicle leases include residual value guarantees. It is probable that we will owe approximately $2.5 million under the residual value guarantees, therefore this amount has been included in the measurement of the lease liability and leased asset.
The components of lease expense were as follows:
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Three Months Ended
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March 31,
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Lease Cost
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Classification
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2021
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2020
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Operating lease cost (a)
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General and administrative expenses
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$
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258
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$
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654
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Finance lease cost:
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Amortization of leased assets
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Depreciation and amortization
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537
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618
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Interest on lease liabilities
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Interest expense, net
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127
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148
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Variable lease cost
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General and administrative expenses
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541
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926
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Sublease income
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Other income, net
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(23)
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(23)
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Total net lease cost
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$
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1,440
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$
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2,323
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(a) Includes short-term leases, which represented $0.1 million and $0.1 million of the balance for the three months ended March 31, 2021 and March 31, 2020, respectively.
Supplemental balance sheet, cash flow and other information related to leases was as follows (in thousands, except lease term and discount rate):
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Leases
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Classification
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March 31,
2021
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December 31,
2020
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Assets:
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Operating lease assets
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Operating lease assets
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$
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1,609
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$
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1,691
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Finance lease assets
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Property, plant and equipment, net of accumulated depreciation (a)
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5,618
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|
6,185
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Total leased assets
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$
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7,227
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$
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7,876
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Liabilities:
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Current
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Operating lease liabilities
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Accrued and other current liabilities
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$
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306
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$
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331
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Finance lease liabilities
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Current portion of long-term debt
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1,408
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|
1,420
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Noncurrent
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Operating lease liabilities
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Noncurrent operating lease liabilities
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1,303
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|
1,360
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Finance lease liabilities
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Long-term debt
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5,800
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|
6,161
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Total lease liabilities
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$
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8,817
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$
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9,272
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(a) Finance lease assets are recorded net of accumulated amortization of $4.4 million and $3.9 million as of March 31, 2021 and December 31, 2020, respectively.
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Lease Term and Discount Rate
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March 31,
2021
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December 31,
2020
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Weighted-average remaining lease term (in years):
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Operating leases
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40.5
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39.9
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Finance leases
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2.7
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3.2
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Weighted-average discount rate:
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Operating leases
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10.00
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%
|
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10.08
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%
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Finance leases
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6.77
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%
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|
6.77
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%
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Three Months Ended
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March 31,
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Supplemental Disclosure of Cash Flow Information and Other Information
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2021
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2020
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Cash paid for amounts included in the measurement of lease liabilities:
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Operating cash flows from operating leases
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$
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258
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$
|
654
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Operating cash flows from finance leases
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127
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148
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Financing cash flows from finance leases
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353
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437
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Leased assets obtained in exchange for new operating lease liabilities
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$
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—
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$
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—
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Leased assets obtained in exchange for new finance lease liabilities
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—
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43
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Maturities of lease liabilities are as follows:
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March 31, 2021
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Operating Leases (a)
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Finance Leases (b)
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Remainder of 2021
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$
|
408
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$
|
1,399
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2022
|
347
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|
|
1,832
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2023
|
200
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|
|
3,447
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2024
|
190
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|
|
383
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2025
|
188
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|
423
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Thereafter
|
6,522
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|
1,062
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Total lease payments
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7,855
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|
8,546
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Less amount representing executory costs (c)
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—
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—
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Net lease payments
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7,855
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8,546
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Less amount representing interest
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(6,246)
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(1,338)
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Present value of total lease liabilities
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1,609
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|
7,208
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Less current lease liabilities
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(306)
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(1,408)
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Long-term lease liabilities
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$
|
1,303
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|
|
$
|
5,800
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(a) Operating lease payments do not include any options to extend lease terms that are reasonably certain of being exercised.
(b) Finance lease payments include $1.7 million related to options to extend lease terms that are reasonably certain of being exercised.
(c) Represents executory costs for all leases. We included executory costs in lease payments under ASC 840, Leases, and have elected to continue to include executory costs for both leases that commenced before and after the effective date of ASC 842.
Note 5 - Equity
Preferred Stock
The Board is authorized to issue up to 1.0 million shares of preferred stock, par value $0.01, and to determine the powers, preferences, privileges, rights, including voting rights, qualifications, limitations and restrictions of those shares without further vote or act by the common stockholders. There was no preferred stock outstanding as of March 31, 2021 and December 31, 2020.
Series A Preferred Stock
The Board declared a dividend of one right (a “Right”) for each of the Company’s issued and outstanding shares of common stock, par value $0.01 per share (“Common Stock”). The dividend was paid to the stockholders of record at the close of business on January 4, 2021 (the “Record Date”). Each Right entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), at a price of $7.02, subject to certain adjustments. The description and terms of the Rights are set forth in the Rights Agreement, dated as of December 21, 2020 (the “Rights Agreement”), between the Company and American Stock Transfer & Trust Company, LLC.
The Rights, which are not exercisable until the Distribution Date (as defined in the Rights Agreement), will expire prior to the earliest of (i) the close of business on December 21, 2021, unless extended prior to expiration (provided any such extension will be submitted to the stockholders of the Company for ratification at the next annual meeting following such extension); (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement; (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement and (iv) the time at which the Rights are terminated upon the occurrence of certain transactions.
Each share of Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or (ii) 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, in each case, paid to holders of Common Stock during such period. Each share of Preferred Stock will entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event of any merger, consolidation or other transaction in which shares of Common Stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per one share of Common Stock.
Other Equity Issuances
During the three months ended March 31, 2021, we issued common stock for our stock-based compensation program, which is discussed further in Note 13.
Note 6 - Earnings Per Common Share
Net loss per basic and diluted common share have been computed using the weighted average number of shares of common stock outstanding during the period. For the three months ended March 31, 2021 and March 31, 2020, no shares of common stock underlying restricted stock or warrants were included in the computation of diluted earnings per common share because the inclusion of such shares would be anti-dilutive based on the net losses reported for those periods.
The following table presents the calculation of basic and diluted net loss per common share, as well as the anti-dilutive stock-based awards that were excluded from the calculation of diluted net loss per share for the periods presented (in thousands except per share amounts):
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Three Months Ended
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March 31,
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2021
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2020
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Numerator: Net loss
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$
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(7,603)
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$
|
(23,044)
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|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares—basic
|
15,877
|
|
|
15,754
|
|
|
|
|
|
|
Common stock equivalents
|
—
|
|
|
—
|
|
|
|
|
|
|
Weighted average shares—diluted
|
15,877
|
|
|
15,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per basic common share
|
$
|
(0.48)
|
|
|
$
|
(1.46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per diluted common share
|
$
|
(0.48)
|
|
|
$
|
(1.46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive stock-based awards excluded:
|
346
|
|
|
394
|
|
|
|
|
|
Note 7 - Intangible Assets
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
Gross Carrying Amount
|
|
|
|
Accumulated Amortization
|
|
Net
|
|
Remaining Useful Life (Years)
|
|
Disposal permits
|
$
|
540
|
|
|
|
|
$
|
(358)
|
|
|
$
|
182
|
|
|
3.9
|
|
Trade name
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
0.0
|
|
Total intangible assets
|
$
|
540
|
|
|
|
|
$
|
(358)
|
|
|
$
|
182
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Gross Carrying Amount
|
|
|
|
Accumulated Amortization
|
|
Net
|
|
Remaining Useful Life (Years)
|
|
Disposal permits
|
$
|
540
|
|
|
|
|
$
|
(346)
|
|
|
$
|
194
|
|
|
4.8
|
|
Trade name
|
799
|
|
|
|
|
(799)
|
|
|
—
|
|
|
0.0
|
|
Total intangible assets
|
$
|
1,339
|
|
|
|
|
$
|
(1,145)
|
|
|
$
|
194
|
|
|
4.8
|
The disposal permits are related to the Rocky Mountain, Northeast and Southern divisions. The remaining weighted average useful lives shown are calculated based on the net book value and remaining amortization period of each respective intangible asset.
Amortization expense was $12.0 thousand and $0.1 million for the three months ended March 31, 2021 and March 31, 2020, respectively.
Note 8 - Assets Held for Sale and Impairment
Impairment Charges
We had no impairment charges during the three months ended March 31, 2021. Impairment charges of $15.6 million were recorded during the three months ended March 31, 2020.
Assets Held for Sale
During the three months ended March 31, 2020, certain property classified as “Assets held for sale” on the condensed consolidated balance sheet located in the Rocky Mountain division was re-evaluated for impairment based on an accepted offer from a buyer that indicated fair value of the real property was lower than its net book value, and impairment charges of $0.6 million were recorded during the three months ended March 31, 2020, which is included in “Impairment of long-lived assets” on our consolidated statements of operations.
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. During 2020, there has been a significant decline in oil prices due to the impacts of the outbreak of COVID-19 and the oil supply conflict between two major oil producing countries, which resulted in a decrease in activities by our customers. As a result of these events, we determined that there were indicators that the carrying value of our assets may not be recoverable.
Our impairment review during the three months ended March 31, 2020 concluded that the carrying values of the assets associated with the landfill in the Rocky Mountain division and trucking equipment in the Southern division were not recoverable as the carrying value exceeded our estimate of future undiscounted cash flows for these asset groups. As a result, we recorded an impairment charge of $15.0 million during the three months ended March 31, 2020 as the carrying value exceeded fair value, which is included in “Impairment of long-lived assets” on our condensed consolidated statements of operations. The fair value of the assets associated with the landfill and trucking equipment asset groups was determined using discounted estimated future cash flows (Level 3 in the fair value hierarchy).
Note 9 - Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following at March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
Accrued payroll and employee benefits
|
$
|
2,694
|
|
|
$
|
2,353
|
|
|
Accrued insurance
|
2,507
|
|
|
2,263
|
|
|
Accrued legal
|
132
|
|
|
294
|
|
|
Accrued taxes
|
697
|
|
|
1,282
|
|
|
Accrued interest
|
191
|
|
|
56
|
|
|
|
|
|
|
|
Accrued operating costs
|
2,585
|
|
|
2,683
|
|
|
Accrued other
|
226
|
|
|
288
|
|
|
|
|
|
|
|
Current operating lease liabilities
|
306
|
|
|
331
|
|
|
|
|
|
|
|
Total accrued and other current liabilities
|
$
|
9,338
|
|
|
$
|
9,550
|
|
Note 10 - Debt
Debt consisted of the following at March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Interest Rate
|
|
Maturity Date
|
|
|
|
|
|
Carrying Value of Debt (k)
|
|
Carrying Value of Debt (k)
|
|
Operating LOC Loan (a)
|
7.00%
|
|
Nov. 2021
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Equipment Loan (b)
|
3.14%
|
|
Nov. 2025
|
|
|
|
|
|
13,000
|
|
|
13,000
|
|
|
CRE Loan (c)
|
6.50%
|
|
Nov. 2032
|
|
|
|
|
|
9,791
|
|
|
9,932
|
|
|
Letter of Credit Facility (d)
|
7.00%
|
|
Nov. 2021
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PPP Loan (e)
|
1.00%
|
|
May 2022
|
|
|
|
|
|
4,000
|
|
|
4,000
|
|
|
Vehicle Term Loan (f)
|
5.27%
|
|
Dec. 2021
|
|
|
|
|
|
272
|
|
|
363
|
|
|
Equipment Finance Loan (g)
|
6.50%
|
|
Nov. 2022
|
|
|
|
|
|
137
|
|
|
158
|
|
|
Finance leases (h)
|
6.77%
|
|
Various
|
|
|
|
|
|
7,208
|
|
|
7,581
|
|
|
Total debt
|
|
|
|
|
|
|
|
|
34,408
|
|
|
35,034
|
|
|
Debt issuance costs presented with debt (i)
|
|
|
|
|
|
(863)
|
|
|
(928)
|
|
|
Total debt, net
|
|
|
|
|
|
|
|
|
33,545
|
|
|
34,106
|
|
|
Less: current portion of long-term debt (j)
|
|
|
|
(2,338)
|
|
|
(2,433)
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
$
|
31,207
|
|
|
$
|
31,673
|
|
_____________________
(a) Interest on the Operating LOC Loan accrues at an annual rate equal to the Prime Rate of plus 3.75%, with an interest floor of 7.00%.
(b) Interest on the Equipment Loan accrues at an annual rate equal to the LIBOR Rate plus 3.00%.
(c) Interest on the CRE Loan accrues at an annual rate equal to the Federal Home Loan Bank Rate of Des Moines three-year advance rate plus 4.50%, with an interest rate floor of 6.50%.
(d) The interest rate presented represented the interest rate on the $5.349 million letter of credit facility.
(e) Interest on the PPP Loan (as defined below) accrues at an annual rate of 1.00%.
(f) Interest on the Vehicle Term Loan (as defined below) accrues at an annual rate of 5.27%.
(g) Interest on the Equipment Finance Loan (as defined below) accrues at an annual rate of 6.50%.
(h) Our finance leases include finance lease arrangements related to fleet purchases and real property with a weighted-average annual interest rate of approximately 6.77%, which mature in varying installments between 2021 and 2029.
(i) The debt issuance costs as of March 31, 2021 and December 31, 2020 resulted from refinancing the debt with First International Bank.
(j) The principal payments due within one year for the CRE Loan, Vehicle Term Loan, Equipment Finance Loan and finance leases are included in current portion of long-term debt as of March 31, 2021 and December 31, 2020.
(k) Our Operating LOC Loan, Equipment Loan, CRE Loan, Vehicle Term Loan, Equipment Finance Loan and finance leases bear interest at rates commensurate with market rates and therefore their respective carrying values approximate fair value.
See below for a discussion of material changes and developments in our debt and its principal terms from those described in Note 12 to the consolidated financial statements in our 2020 Annual Report on Form 10-K.
Indebtedness
As of March 31, 2021, we had $34.4 million of indebtedness outstanding, consisting of $13.0 million under the Equipment Loan, $9.8 million under the CRE Loan, $4.0 million under the PPP Loan, $0.3 million under the Vehicle Term Loan, $0.1 million under the Equipment Finance Loan and $7.2 million of finance leases for vehicle financings and real property leases.
As further described below, our Operating LOC Loan, CRE Loan, and Equipment Loan contain certain affirmative and negative covenants, including a minimum debt service coverage ratio (“DSCR”), beginning December 31, 2021, as well as other terms and conditions that are customary for loans of this type. As of March 31, 2021, we were in compliance with all covenants.
Master Loan Agreement
On November 16, 2020, the Company entered into the Master Loan Agreement with Lender. Pursuant to the Master Loan Agreement, Lender agreed to extend to the Company: (i) the Equipment Loan that is subject to the Main Street Priority Loan Facility (the “MSPLF”) as established by the Board of Governors of the Federal Reserve System under Section 13(3) of the Federal Reserve Act; (ii) the CRE Loan; (iii) the Operating LOC Loan; and (iv) the Letter of Credit Facility. On November 18, 2020, the Company was advised by Lender that the Equipment Loan had been approved as a MSPLF, and the Loans were funded and closed on November 20, 2020. In connection with the closing of the Loans, the Company repaid all outstanding obligations in full under the First Lien Credit Agreement and Second Lien Term Loan Agreement totaling $12.6 million and $8.3 million, respectively.
The terms of the Master Loan Agreement provide for customary events of default, including, among others, those relating to a failure to make payment, bankruptcy, breaches of representations and covenants, and the occurrence of certain events. Pursuant to the Master Loan Agreement, the Company must maintain a minimum DSCR of 1.35 to 1.00 beginning December 31, 2021 and annually on December 31 of each year thereafter. The DSCR means the ratio of (i) Adjusted EBITDA to (ii) the annual debt service obligations (less subordinated debt annual debt service) of the Company, calculated based on the actual four quarters ended on the applicable December 31 measurement date. If the DSCR falls below 1.35 to 1.00, then in addition to all other rights and remedies available to Lender, the interest rates on the CRE Loan, the Operating LOC Loan and the Letter of Credit Facility will increase by 1.5% until the minimum DSCR is maintained. The Company may cure a failure to comply with the DSCR by issuing equity interests in the Company for cash and applying the proceeds to the applicable Adjusted EBITDA measurement.
In addition, the Master Loan Agreement limits capital expenditures to $7.5 million annually and requires the Company to maintain a positive working capital position of at least $7.0 million at all times. The Master Loan Agreement also requires the Company deposit into the Reserve Account the sum of $2.5 million and make additional monthly deposits of $100 thousand into the Reserve Account. Funds held in the Reserve Account are not accessible by the Company and are pledged as additional security for the CRE Loan, the Operating LOC Loan and the Letter of Credit Facility.
Equipment Loan
The Equipment Loan is evidenced by that certain Promissory Note (Equipment Loan) executed by the Company in the original principal amount of $13.0 million. The Equipment Loan bears interest at a rate of one-month US dollar LIBOR plus 3.00%. Interest payments during the first year will be deferred and added to the loan balance and principal payments during the first two years will be deferred. Monthly amortization of principal will commence on December 1, 2022, with principal amortization payments due in annual installments of 15% on November 16, 2023, 15% on November 16, 2024, and the remaining 70% on the maturity date of November 16, 2025. The Equipment Loan, plus accrued and unpaid interest, may be prepaid at any time at par. The entire outstanding principal balance of the Equipment Loan together with all accrued and unpaid interest is due and payable in full on November 16, 2025. In connection with the Equipment Loan, the Company paid a $130 thousand origination fee to Lender and a $130 thousand origination fee to MSPLF.
The Equipment Loan includes all covenants and certifications required by the MSPLF, including, without limitation, the MSPLF Borrower Certifications and Covenants Instructions and Guidance. In connection with the same, the Company delivered a Borrower Certifications and Covenants (the “MS Certifications and Covenants”) to MS Facilities LLC, a Delaware limited liability company, a special purpose vehicle of the Federal Reserve. Under the MS Certifications and Covenants, the Company is subject to certain restrictive covenants during the period that the Equipment Loan is outstanding and, with respect to certain of those restrictive covenants, for an additional one year period after the Equipment Loan is repaid, including restrictions on the Company’s ability to repurchase stock, pay dividends or make other distributions and limitations on executive compensation and severance arrangements. The Equipment Loan is secured by a first lien security interest in all equipment and titled vehicles of the Company and its subsidiaries.
CRE Loan
The CRE Loan is evidenced by that certain Promissory Note (Real Estate) executed by the Company in the original principal amount of $10.0 million. The CRE Loan bears interest at the Federal Home Loan Bank Rate of Des Moines three-year advance rate plus 4.50% with an interest rate floor of 6.50%. The CRE Loan has a twelve-year maturity. The Company is required to make monthly principal and interest payments, and monthly escrow deposits for real estate taxes and insurance. The entire outstanding principal balance of the CRE Loan together with all accrued and unpaid interest is due and payable in full on November 13, 2032. In connection with the CRE Loan, the Company paid a $150 thousand origination fee to Lender.
The CRE Loan is secured by a first lien real estate mortgage on certain real estate owned by the Company and its subsidiaries and by the Reserve Account. The Company will incur a declining prepayment premium of 6%, 5%, 4%, 3%, 2%, and 1% of the outstanding principal balance of the CRE Loan over the first six years of the loan, respectively. The Company is not permitted to prepay the principal of the CRE Loan more than 5% per year without Lender’s prior written approval.
Operating LOC Loan
The Operating LOC Loan is evidenced by that certain Revolving Promissory Note (Operating Line of Credit Loan) executed by the Company in the original maximum principal amount of $5.0 million. The Operating LOC Loan bears interest at a variable rate, adjusting daily, equal to the Prime Rate plus 3.75%, with an interest rate floor of 7.00%. In connection with the Operating LOC Loan, the Company paid a $50 thousand origination fee to Lender. The Operating LOC Loan is currently undrawn and fully available to the Company.
The Operating LOC Loan is secured by a first lien security interest in all business assets of the Company and its subsidiaries, including without limitation all accounts receivable, inventory, trademarks and intellectual property licenses to which it is a party and by the Reserve Account. The entire outstanding principal balance of the Operating LOC Loan together with all accrued and unpaid interest is due and payable in full on November 14, 2021.
Letter of Credit Facility
The Letter of Credit Facility provides for the issuance of letters of credit of up to $4.839 million in aggregate face amount and is evidenced by that certain Promissory Note (Letter of Credit Loan) executed by the Company. Amounts drawn on letters of credit issued under the Letter of Credit Facility bear interest at a variable rate, adjusting daily, equal to the Prime Rate plus 3.75%, with an interest rate floor of 7.00%. The Letter of Credit Facility has a one-year final maturity on November 19, 2021.
On January 25, 2021, the Letter of Credit Facility was amended in order to increase by $510,000 the maximum availability thereunder. As amended, the Letter of Credit Facility provides for the issuance of letters of credit of up to $5.349 million in aggregate face amount and is evidenced by that certain Amended and Restated Promissory Note (Letter of Credit Loan), dated January 25, 2021, executed by the Company.
In connection with the Letter of Credit Facility, the Company is required to pay an annual fee equal to 3.00% of the maximum undrawn face amount of each letter of credit issued thereunder. The Letter of Credit Facility is secured by a first lien security interest in all business assets of the Company and its subsidiaries and by the Reserve Account.
Paycheck Protection Program Loan
On May 8, 2020, pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020, an indirect wholly-owned subsidiary of the Company (the “PPP Borrower”) received proceeds of a loan (the “PPP Loan”) from First International Bank & Trust (the “PPP Lender”) in the principal amount of $4.0 million. The PPP Loan is evidenced by a promissory note (the “Promissory Note”), dated May 8, 2020. The Promissory Note is unsecured, matures on May 8, 2022, bears interest at a rate of 1.00% per annum, and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration (the “SBA”) under the CARES Act.
Under the terms of the PPP, up to the entire principal amount of the PPP Loan, and accrued interest, may be forgiven if the proceeds are used for certain qualifying expenses over the covered period as described in the CARES Act and applicable implementing guidance issued by the SBA, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period.
In June 2020, the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”) was signed into law, which amended the CARES Act. The Flexibility Act changed key provisions of the PPP, including, but not limited to: (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering PPP loan payments and (iii) the process for measurement of loan forgiveness. More specifically, the Flexibility Act provides a minimum maturity of five years for all PPP loans made on or after the date of the enactment of the Flexibility Act (“June 5, 2020”) and permits lenders and borrowers to extend the maturity date of earlier PPP loans by mutual agreement. As of the date of this filing, the Company has not approached the PPP Lender to request an extension of the maturity date from two years to five years. The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (“covered period”), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. In addition, the Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either eight weeks or 24 weeks.
The PPP Borrower used the PPP Loan proceeds for designated qualifying expenses over the covered period and applied for forgiveness of the PPP Loan during September 2020 in accordance with the terms of the PPP, but no assurance can be given that the PPP Borrower will obtain forgiveness of the PPP Loan in whole or in part. As such, the Company has classified the PPP Loan as debt and it is included in long-term debt on the consolidated balance sheet.
With respect to any portion of the PPP Loan that is not forgiven, the PPP Loan will be subject to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults, breaches of the provisions of the Promissory Note and cross-defaults on any other loan with the PPP Lender or other creditors. Upon a default under the Promissory Note, including the non-payment of principal or interest when due, the obligations of the PPP Borrower thereunder may be accelerated. In the event the PPP Loan is not forgiven, the principal amount of $4.0 million shall be repaid at maturity.
Vehicle Term Loan
On December 27, 2019, we entered into a Direct Loan Security Agreement (the “Vehicle Term Loan”) with PACCAR Financial Corp as the Secured Party. The Vehicle Term Loan was used to refinance 38 trucks that were previously recorded as finance leases with balloon payments that would have been due in January of 2020. The Vehicle Term Loan matures on December 27, 2021, when the entire unpaid principal balance and interest, plus any other accrued charges, shall become due and payable. The Vehicle Term Loan shall be repaid in installments of $31,879 beginning on January 27, 2020 and on the same day of each month thereafter, with interest accruing at an annual rate of 5.27%.
Equipment Finance Loan
On November 20, 2019, we entered into a Retail Installment Contract (the “Equipment Finance Loan”) with a secured party to finance $0.2 million of equipment. The Equipment Finance Loan matures on November 15, 2022, and shall be repaid in monthly installments of approximately $7 thousand beginning December 2019 and then each month thereafter, with interest accruing at an annual rate of 6.50%.
Note 11 - Derivative Warrants
Upon emergence from chapter 11 on August 7, 2017 (the “Effective Date”), pursuant to the prepackaged plans of reorganization (together, and as amended, the “Plan”), we issued to the holders of the pre-Effective Date 9.875% Senior Notes due 2018 (the “2018 Notes”) and holders of certain claims relating to the rejection of executory contracts and unexpired leases warrants to purchase an aggregate of 118,137 shares of common stock, par value $0.01, at an exercise price of $39.82 per share and a term expiring seven years from the Effective Date. The effective value of the outstanding warrant was zero at March 31, 2021 and December 31, 2020.
Note 12 - Income Taxes
We recorded no income tax expense or benefit during the three months ended March 31, 2021. As a result, the effective tax rate for the three months ended March 31, 2021 was 0.0%, which differed from the federal statutory rate of 21.0%. The difference is primarily due to the increase in the valuation allowance on deferred tax assets resulting from current year losses.
The effective income tax rate for the three months ended March 31, 2020 was 0.0%, which differed from the federal statutory rate of 21.0% primarily due to the increase in the valuation allowance on deferred tax assets resulting from current year losses.
We have significant deferred tax assets, consisting primarily of net operating losses, some of which have a limited life, generally expiring between the years 2032 and 2037, and capital losses, which began to expire in 2020. We regularly assess the evidence available 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 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 our continued ordinary losses, at March 31, 2021 we determined that our deferred tax liabilities were not sufficient to fully realize our deferred tax assets. Accordingly, a valuation allowance continues to be required against the portion of our deferred tax assets that is not offset by deferred tax liabilities. We expect our effective income tax rate to be near 0.0% for the remainder of 2021.
Note 13 - Stock-Based Compensation
Award Plans
2017 Long Term Incentive Plan
Pursuant to the requirements of the Plan, on February 22, 2018, the Board approved the Nuverra Environmental Solutions, Inc. 2017 Long Term Incentive Plan (the “Incentive Plan”). The Incentive Plan is intended to provide for the grant of equity-based awards to designated members of the Company’s management and employees. Pursuant to the terms of the Plan, the Incentive Plan became effective on the Effective Date. The maximum number of shares of the Company’s common stock that is available for the issuance of awards under the Incentive Plan is 1,772,058. As of March 31, 2021, approximately 510,127 shares were available for issuance under the Incentive Plan.
2018 Restricted Stock Plan for Directors
Further, the Compensation Committee on February 22, 2018 adopted the 2018 Restricted Stock Plan for Directors (the “Director Plan”), which was ratified by the Company’s stockholders at the Company’s 2018 Annual Meeting. The Director Plan provides for the grant of restricted stock to the non-employee directors of the Company. On December 18, 2020, our stockholders approved at our annual stockholder meeting an amendment to increase the number of shares that may be issued under the Director Plan to 250,000 shares of common stock from 100,000 shares of common stock. As of March 31, 2021, 150,000 shares were available for issuance under the Director Plan.
There were no grants awarded under either the Incentive Plan or the Director Plan during the three months ended March 31, 2021 and March 31, 2020.
The total stock-based compensation expense, net of estimated forfeitures, included in “General and administrative expenses” in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021 and March 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
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2021
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2020
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|
|
Restricted stock (1)
|
$
|
133
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|
|
$
|
290
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|
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|
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Total expense
|
$
|
133
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|
$
|
290
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|
|
|
|
|
(1) Includes expense related to restricted stock awards, performance-based restricted stock units, and time-based restricted stock units granted under the Incentive Plan and the Director Plan.
At March 31, 2021, the total unrecognized share-based compensation expense, net of estimated forfeitures, was $486.5 million and is expected to be recognized over a weighted average period of 1.5 years.
Note 14 - Commitments and Contingencies
Environmental Liabilities
We are 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. Our 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. We have installed safety, monitoring and environmental protection equipment such as pressure sensors, containment walls, supervisory control and data acquisition systems 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.
We believe we are in material compliance with all applicable environmental protection laws and regulations in the United States and the states in which we operate. We believe that there are no unrecorded liabilities as of the periods reported herein in connection with our compliance with applicable environmental laws and regulations. The condensed consolidated balance sheets at March 31, 2021 and December 31, 2020 did not include any accruals for environmental matters.
Contingent Consideration for Ideal Settlement
On July 25, 2017, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Plan. On June 28, 2017, the Company and certain of its material subsidiaries (collectively with the Company, the “Nuverra Parties”) filed a motion with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking authorization to resolve unsecured claims related to the $8.5 million contingent consideration from the Ideal Oilfield Disposal LLC acquisition (the “Ideal Settlement”). On July 11, 2017, the Bankruptcy Court entered an order authorizing the Ideal Settlement. Pursuant to the approved settlement terms, the $8.5 million contingent claim was replaced with an obligation on the part of the applicable Nuverra Party to transfer $0.5 million to the counterparties to the Ideal Settlement upon emergence from chapter 11, and $0.5 million when the Ideal Settlement counterparties deliver the required permits and certificates necessary for the issuance of the second special waste disposal permit. The $0.5 million due upon emergence from chapter 11 was paid during the five months ended December 31, 2017. The remaining $0.5 million, due when the counterparties deliver the required permits and certificates necessary for the issuance of the second special waste disposal permit, has been classified as noncurrent and is reported in “Long-term contingent consideration” on the condensed consolidated balance sheets, as these permits and certificates are not expected to be received within one year.
State Sales and Use Tax Liabilities
During the year ended December 31, 2017, the Pennsylvania Department of Revenue (or “DOR”) completed an audit of our sales and use tax compliance for the period January 1, 2012 through May 31, 2017. As a result of the audit, we were assessed by the DOR for additional state and local sales and use tax plus penalties and interest. During the years ended December 31, 2017 and 2018, we disputed various claims in the assessment made by the DOR through the appropriate boards of appeal and were able to obtain relief for many of the contested claims. However, in January of 2019, the final appeals board upheld an assessment of sales tax and interest that relates to one material position. We have appealed this decision to the Commonwealth of Pennsylvania as we continue to believe that the transactions involved are exempt from sales tax in Pennsylvania, and therefore we have not recorded an accrual as of March 31, 2021. If we lose this appeal, which could take several years to settle, we estimate that we would be required to pay between $1.0 million and $1.5 million to the DOR.
Surety Bonds and Letters of Credit
At March 31, 2021, and December 31, 2020, we had surety bonds outstanding of approximately $4.4 million and $4.2 million respectively, primarily to support financial assurance obligations related to our landfill and disposal wells. Additionally, at March 31, 2021 and December 31, 2020, we had outstanding irrevocable letters of credit totaling none and $5.4 million, respectively, to support various agreements, leases and insurance policies.
Note 15 - Legal Matters
Litigation
There are various lawsuits, claims, investigations and proceedings that have been brought or asserted against us, 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. We record 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.
We believe that we have valid defenses with respect to legal matters pending against us. Based on our experience, we also believe that the damage amounts claimed in pending lawsuits are not necessarily a meaningful indicator of our potential liability. Litigation is inherently unpredictable, and it is possible that our financial condition, 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 us. Based on information currently known to our management, we do not expect the outcome in any of these known legal proceedings, individually or collectively, to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
Confirmation Order Appeal
On July 26, 2017, David Hargreaves, an individual holder of 2018 Notes, appealed the Confirmation Order to the District Court of the District of Delaware (the “District Court”) and filed a motion for a stay pending appeal from the District Court. Although the motion for a stay pending appeal was denied, the appeal remained pending and the District Court heard oral arguments in May 2018, and in August 2018, the District Court issued an order dismissing the appeal. Hargreaves subsequently appealed the District Court’s decision to the United States Court of Appeals for the Third Circuit (the “Appellate Court”). The parties filed appellate briefs in December 2018 and January 2019, and presented oral arguments to a three-judge panel of the Appellate Court in November 2020. On January 6, 2021, the Appellate Court issued a decision in favor of Nuverra, affirming the dismissal of the appeal. Hargreaves subsequently filed a petition for rehearing, either by the three-judge panel or en banc by the full Appellate Court, and on February 4, 2021 the Appellate Court issued an order denying the petition for rehearing. Hargreaves may appeal the decision to the Supreme Court of the United States.
Note 16 - Related Party and Affiliated Company Transactions
There have been no significant changes to the other related party transactions as described in Note 23 to the consolidated financial statements in our 2020 Annual Report on Form 10-K.
Note 17 - Segments
We evaluate 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. Our business is comprised of three operating divisions, which we consider to be operating and reportable segments of our operations: (1) the Rocky Mountain division comprising the Bakken Shale area, (2) the Northeast division comprising the Marcellus and Utica Shale areas and (3) the Southern division comprising the Haynesville Shale area. Corporate/Other includes certain corporate costs and certain other corporate assets.
Financial information for our reportable segments related to operations is presented below.
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Rocky Mountain
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Northeast
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Southern
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Corporate/ Other
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Total
|
|
Three months ended March 31, 2021
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Revenue
|
$
|
12,789
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|
|
$
|
7,306
|
|
|
$
|
3,570
|
|
|
|
|
$
|
—
|
|
|
$
|
23,665
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|
|
Direct operating expenses
|
11,363
|
|
|
6,653
|
|
|
2,965
|
|
|
|
|
—
|
|
|
20,981
|
|
|
General and administrative expenses
|
921
|
|
|
359
|
|
|
158
|
|
|
|
|
2,089
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|
|
3,527
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Depreciation and amortization
|
2,312
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|
|
2,355
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|
|
1,392
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|
|
|
|
11
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|
|
6,070
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Operating loss
|
(1,807)
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|
|
(2,061)
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|
|
(945)
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(2,100)
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|
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(6,913)
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Loss before income taxes
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(1,960)
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|
|
(2,164)
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|
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(996)
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|
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|
|
(2,483)
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|
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(7,603)
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As of March 31, 2021
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Total assets (a)
|
$
|
56,426
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|
|
$
|
51,316
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|
|
$
|
60,534
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|
|
|
|
$
|
15,722
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|
|
$
|
183,998
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|
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Total assets held for sale
|
—
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|
—
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|
|
—
|
|
|
|
|
778
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|
|
778
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|
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Three months ended March 31, 2020
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Revenue
|
$
|
23,468
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|
|
$
|
9,794
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|
|
$
|
4,680
|
|
|
|
|
$
|
—
|
|
|
$
|
37,942
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|
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Direct operating expenses
|
19,551
|
|
|
8,371
|
|
|
3,554
|
|
|
|
|
—
|
|
|
31,476
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|
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General and administrative expenses
|
1,489
|
|
|
634
|
|
|
270
|
|
|
|
|
2,531
|
|
|
4,924
|
|
|
Depreciation and amortization
|
3,465
|
|
|
2,551
|
|
|
1,969
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|
|
|
|
4
|
|
|
7,989
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|
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Impairment of long-lived assets
|
12,183
|
|
|
—
|
|
|
3,396
|
|
|
|
|
—
|
|
|
15,579
|
|
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Operating income (loss)
|
(13,220)
|
|
|
(1,762)
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|
|
(4,509)
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|
|
|
|
(2,535)
|
|
|
(22,026)
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Income (loss) before income taxes
|
(13,255)
|
|
|
(1,875)
|
|
|
(4,563)
|
|
|
|
|
(3,351)
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|
|
(23,044)
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|
As of March 31, 2020
|
|
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|
|
|
|
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Total assets (a)
|
$
|
75,357
|
|
|
$
|
60,529
|
|
|
$
|
65,752
|
|
|
|
|
$
|
12,816
|
|
|
$
|
214,454
|
|
|
Total assets held for sale
|
1,100
|
|
|
135
|
|
|
—
|
|
|
|
|
778
|
|
|
2,013
|
|
_____________________
(a) Total assets exclude intercompany receivables eliminated in consolidation.