8-K
Nine Energy Service, Inc. (NINE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2022
NINE ENERGY SERVICE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-38347 | 80-0759121 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) |
| 2001 Kirby Drive, Suite 200<br> <br>Houston, Texas 77019 | ||
| --- | ||
| (Address of principal executive offices, including zip code) |
(281) 730-5100
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | NINE | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On August 3, 2022, Nine Energy Service, Inc. issued a press release providing information on its results of operations and financial condition for the quarter ended June 30, 2022. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information under this Item 2.02 and in Exhibit 99.1 to this Current Report on Form 8-K are being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information under this Item 2.02 and in Exhibit 99.1 to this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
| Exhibit<br>No. | Description |
| --- | --- |
| 99.1 | Nine Energy Service, Inc. press release dated August 3, 2022. |
| 104 | Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: August 3, 2022 | NINE ENERGY SERVICE, INC. | |
|---|---|---|
| By: | /s/ Theodore R. Moore | |
| Theodore R. Moore<br> <br>Senior Vice President and General Counsel |
EX-99.1
Exhibit 99.1
Nine Energy Service Announces Second Quarter 2022 Results
| • | Total liquidity position of $74.5 million as of June 30, 2022 |
|---|---|
| • | Revenue, net loss and adjusted EBITDA^A^ of<br>$142.3 million, $(1.0) million and $18.9 million, respectively, for the second quarter of 2022 |
| --- | --- |
| • | Second quarter 2022 basic loss per share of $(0.03) |
| --- | --- |
| • | For the second quarter of 2022 the Company generated ROIC^B^<br>of 11.4%. |
| --- | --- |
HOUSTON – Nine Energy Service, Inc. (“Nine” or the “Company”) (NYSE: NINE) reported second quarter 2022 revenues of $142.3 million, net loss of $(1.0) million and adjusted EBITDA of $18.9 million. For the second quarter of 2022, adjusted net loss^C^ was $(0.2) million, or $(0.01) adjusted basic loss per share^D^.
The Company had provided original second quarter 2022 revenue guidance between $130.0 and $140.0 million, with actual results falling above the provided range and representing a sequential revenue increase of approximately 22% quarter over quarter.
“We had another very strong growth quarter,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service, “with pricing and activity increases across the majority of our service lines.”
“We remain very optimistic on the market, and we continue to implement net price increases, enabling us to drive strong incremental margins again this quarter. Our cementing service line continues to outperform market drivers, increasing sequential quarterly revenue by approximately 22%, versus the average U.S. rig count, which increased by approximately 13%. Our Stinger Dissolvable plug technology is performing well in the field, demonstrated by the 33% increase in total units sold quarter over quarter, despite EIA-reported U.S. completions increasing by only 3%. Coiled tubing revenue increased by approximately 28%, driven by both higher utilization and price increases. There continues to be a shortage of qualified labor and equipment in the industry, which has been the main catalyst for price increases for Nine. This will only be exacerbated by any incremental activity added throughout the remainder of this year and into 2023.”
“The outlook for the remainder of 2022 and 2023 is positive. It is difficult to gauge the magnitude of any potential recessionary pressures, however, we believe North American shale and short-cycle projects will be vital for global supply. Additionally, oilfield service companies, including Nine, are demonstrating capital discipline, which has limited available equipment in the market. Any capital equipment orders being placed are delayed up to 12 months and will need to be staffed. This backdrop sets up very well for Nine. Commodity prices remain very supportive for our customers, and we anticipate we will continue to increase prices throughout the remainder of 2022 and into 2023.”
“With what we know today, we anticipate revenue, adjusted EBITDA and cash flow to improve sequentially for Q3. I like Nine’s geographic and service line diversity and believe it positions us well for further growth. We have increased profitability over the last two quarters with additional runway to implement net price increases within our service lines and increase volumes for our tools.”
Operating Results
During the second quarter of 2022, the Company reported revenues of $142.3 million, gross profit of $19.8 million and adjusted gross profit^E^ of $29.6 million. Gross profit increased by approximately 56% quarter over quarter, and adjusted gross profit increased by approximately 31% quarter over quarter. During the second quarter, the Company generated ROIC of 11.4%.
During the second quarter of 2022, the Company reported selling, general and administrative expense of $12.5 million. Depreciation and amortization expense in the second quarter of 2022 was $10.3 million.
The Company’s tax benefit for the second quarter of 2022 was approximately $0.5 million and $0.4 million year to date. The benefit for 2022 is the result of our tax position in state and non-U.S. tax jurisdictions.
Liquidity and Capital Expenditures
During the second quarter of 2022, the Company reported net cash used in operating activities of $(0.4) million. Capital expenditures totaled $3.7 million during the second quarter of 2022.
As of June 30, 2022, Nine’s cash and cash equivalents were $22.4 million, and the Company had $52.1 million of availability under the revolving credit facility, resulting in a total liquidity position of $74.5 million as of June 30, 2022. On June 30, 2022, the Company had $27.0 million of borrowings under the 2018 ABL Credit Facility.
| ^ABCDE^ | See end of press release for definitions |
|---|
Conference Call Information
The call is scheduled for Thursday, August 4, 2022, at 9:00 am Central Time. Participants may join the live conference call by dialing U.S. (Toll Free): (888) 437-3179 or International: (404) 267-0369 and asking for the “Nine Energy Service Earnings Call”. Participants are encouraged to dial into the conference call ten to fifteen minutes before the scheduled start time to avoid any delays entering the earnings call.
For those who cannot listen to the live call, a telephonic replay of the call will be available through August 18, 2022, and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13731485.
About Nine Energy Service
Nine Energy Service is an oilfield services company that offers completion solutions within North America and abroad. The Company brings years of experience with a deep commitment to serving clients with smarter, customized solutions and world-class resources that drive efficiencies. Serving the global oil and gas industry, Nine continues to differentiate itself through superior service quality, wellsite execution and cutting-edge technology. Nine is headquartered in Houston, Texas with operating facilities in the Permian, Eagle Ford, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and Canada.
For more information on the Company, please visit Nine’s website at nineenergyservice.com.
Forward Looking Statements
The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. Forward-looking statements also include statements that refer to or are based on projections, uncertain events or assumptions. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, the level of capital spending and well completions by the onshore oil and natural gas industry, which has been and may again be affected by the COVID-19 pandemic and related economic repercussions and which may be affected by geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa; general economic conditions and inflation, particularly, cost inflation with labor or materials; the adequacy of the Company’s capital resources and liquidity; the Company’s ability to attract and retain key employees, technical personnel and other skilled and qualified workers; the ongoing COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, performance of contracts and supply chain disruptions; the Company’s ability to maintain existing prices or implement price increases on our products and services; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company’s dissolvable plug products; conditions inherent in the oilfield services industry, such as equipment defects, liabilities arising from accidents or damage involving our fleet of trucks or other equipment, explosions and uncontrollable flows of gas or well fluids, and loss of well control; the Company’s ability to implement and commercialize new technologies, services and tools; the Company’s ability to grow its completion tool business; the Company’s ability to manage capital expenditures; the Company’s ability to accurately predict customer demand; the loss of, or interruption or delay in operations by, one or more significant customers; the loss of or interruption in operations of one or more key suppliers; the incurrence of significant costs and liabilities resulting from litigation; changes in laws or regulations regarding issues of health, safety and protection of the environment; and other factors described in the “Risk Factors” and “Business” sections of the Company’s most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.
Nine Energy Service Investor Contact:
Heather Schmidt
Vice President, Strategic Development, Investor Relations and Marketing
(281) 730-5113
investors@nineenergyservice.com
NINE ENERGY SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br>2022 | March 31,<br>2022 | |||||
| Revenues | $ | 142,346 | $ | 116,935 | ||
| Cost and expenses | ||||||
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 112,741 | 94,318 | ||||
| General and administrative expenses | 12,455 | 11,836 | ||||
| Depreciation | 6,511 | 6,504 | ||||
| Amortization of intangibles | 3,768 | 3,904 | ||||
| Loss on revaluation of contingent liability | 186 | 5 | ||||
| (Gain) loss on sale of property and equipment | 267 | (714 | ) | |||
| Income from operations | 6,418 | 1,082 | ||||
| Interest expense | 8,133 | 8,077 | ||||
| Interest income | (25 | ) | (12 | ) | ||
| Other income | (190 | ) | (196 | ) | ||
| Loss before income taxes | (1,500 | ) | (6,787 | ) | ||
| Provision (benefit) for income taxes | (522 | ) | 112 | |||
| Net loss | $ | (978 | ) | $ | (6,899 | ) |
| Loss per share | ||||||
| Basic | $ | (0.03 | ) | $ | (0.23 | ) |
| Diluted | $ | (0.03 | ) | $ | (0.23 | ) |
| Weighted average shares outstanding | ||||||
| Basic | 30,832,566 | 30,491,976 | ||||
| Diluted | 30,832,566 | 30,491,976 | ||||
| Other comprehensive income (loss), net of tax | ||||||
| Foreign currency translation adjustments, net of tax of $0 and $0 | $ | (174 | ) | $ | 8 | |
| Total other comprehensive income (loss), net of tax | (174 | ) | 8 | |||
| Total comprehensive loss | $ | (1,152 | ) | $ | (6,891 | ) |
NINE ENERGY SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
| March 31,<br>2022 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | 22,408 | $ | 19,941 | ||
| Accounts receivable, net | 88,245 | 79,744 | |||
| Income taxes receivable | 1,726 | 1,108 | |||
| Inventories, net | 48,950 | 45,959 | |||
| Prepaid expenses and other current assets | 11,362 | 12,227 | |||
| Total current assets | 172,691 | 158,979 | |||
| Property and equipment, net | 77,993 | 81,808 | |||
| Operating lease<br>right-of-use assets, net | 34,143 | 33,883 | |||
| Finance lease<br>right-of-use assets, net | 1,398 | 1,520 | |||
| Intangible assets, net | 108,736 | 112,504 | |||
| Other long-term assets | 784 | 2,175 | |||
| Total assets | 395,745 | $ | 390,869 | ||
| Liabilities and Stockholders’ Equity (Deficit) | |||||
| Current liabilities | |||||
| Accounts payable | 35,470 | $ | 29,887 | ||
| Accrued expenses | 22,980 | 29,606 | |||
| Current portion of long-term debt | 27,805 | 1,168 | |||
| Current portion of operating lease obligations | 6,458 | 6,085 | |||
| Current portion of finance lease obligations | 644 | 989 | |||
| Total current liabilities | 93,357 | 67,735 | |||
| Long-term liabilities | |||||
| Long-term debt | 318,147 | 337,731 | |||
| Long-term operating lease obligations | 28,974 | 29,181 | |||
| Other long-term liabilities | 1,586 | 1,588 | |||
| Total liabilities | 442,064 | 436,235 | |||
| Stockholders’ equity (deficit) | |||||
| Common stock (120,000,000 shares authorized at .01 par value; 33,369,148 and 32,821,113 shares<br>issued and outstanding at June 30, 2022 and March 31, 2022, respectively) | 334 | 328 | |||
| Additional paid-in capital | 774,335 | 774,142 | |||
| Accumulated other comprehensive loss | (4,701 | ) | (4,527 | ) | |
| Accumulated deficit | (816,287 | ) | (815,309 | ) | |
| Total stockholders’ equity (deficit) | (46,319 | ) | (45,366 | ) | |
| Total liabilities and stockholders’ equity (deficit) | 395,745 | $ | 390,869 |
All values are in US Dollars.
NINE ENERGY SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br>2022 | March 31,<br>2022 | |||||
| Cash flows from operating activities | ||||||
| Net loss | $ | (978 | ) | $ | (6,899 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||
| Depreciation | 6,511 | 6,504 | ||||
| Amortization of intangibles | 3,768 | 3,904 | ||||
| Amortization of deferred financing costs | 642 | 643 | ||||
| Amortization of operating leases | 2,035 | 1,991 | ||||
| Recovery of doubtful accounts | (4 | ) | (172 | ) | ||
| Provision for inventory obsolescence | 886 | 1,077 | ||||
| Stock-based compensation expense | 495 | 927 | ||||
| (Gain) loss on sale of property and equipment | 267 | (714 | ) | |||
| Loss on revaluation of contingent liability | 186 | 5 | ||||
| Changes in operating assets and liabilities, net of effects from acquisitions | ||||||
| Accounts receivable, net | (8,514 | ) | (15,541 | ) | ||
| Inventories, net | (3,972 | ) | (4,838 | ) | ||
| Prepaid expenses and other current assets | 2,788 | (2,528 | ) | |||
| Accounts payable and accrued expenses | (1,835 | ) | 10,951 | |||
| Income taxes receivable/payable | (615 | ) | 285 | |||
| Other assets and liabilities | (2,090 | ) | (2,054 | ) | ||
| Net cash used in operating activities | (430 | ) | (6,459 | ) | ||
| Cash flows from investing activities | ||||||
| Proceeds from sales of property and equipment | 101 | 2,041 | ||||
| Proceeds from property and equipment casualty losses | — | 175 | ||||
| Purchases of property and equipment | (3,068 | ) | (876 | ) | ||
| Net cash provided by (used in) investing activities | (2,967 | ) | 1,340 | |||
| Cash flows from financing activities | ||||||
| Payments on Magnum Promissory Notes | — | (562 | ) | |||
| Proceeds from 2018 ABL Credit Facility | 7,000 | 5,000 | ||||
| Payments of short-term debt | (363 | ) | (363 | ) | ||
| Payments on finance leases | (339 | ) | (329 | ) | ||
| Payments of contingent liability | (48 | ) | (44 | ) | ||
| Vesting of restricted stock and stock units | (296 | ) | (135 | ) | ||
| Net cash provided by financing activities | 5,954 | 3,567 | ||||
| Impact of foreign currency exchange on cash | (90 | ) | (16 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 2,467 | (1,568 | ) | |||
| Cash and cash equivalents | ||||||
| Beginning of period | 19,941 | 21,509 | ||||
| End of period | $ | 22,408 | $ | 19,941 |
NINE ENERGY SERVICE, INC.
RECONCILIATION OF ADJUSTED EBITDA
(In Thousands)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br>2022 | March 31,<br>2022 | |||||
| EBITDA reconciliation: | ||||||
| Net loss | $ | (978 | ) | $ | (6,899 | ) |
| Interest expense | 8,133 | 8,077 | ||||
| Interest income | (25 | ) | (12 | ) | ||
| Provision (benefit) for income taxes | (522 | ) | 112 | |||
| Depreciation | 6,511 | 6,504 | ||||
| Amortization of intangibles | 3,768 | 3,904 | ||||
| EBITDA | $ | 16,887 | $ | 11,686 | ||
| Loss on revaluation of contingent liability (1) | 186 | 5 | ||||
| Restructuring charges | 805 | 285 | ||||
| Stock-based compensation and cash award expense | 758 | 927 | ||||
| (Gain) loss on sale of property and equipment | 267 | (714 | ) | |||
| Legal fees and settlements (2) | 11 | 34 | ||||
| Adjusted EBITDA | $ | 18,914 | $ | 12,223 | ||
| (1) | Amounts relate to the revaluation of contingent liability associated with a 2018 acquisition.<br> | |||||
| --- | --- | |||||
| (2) | Amounts represent fees, legal settlements and/or accruals associated with legal proceedings brought pursuant to<br>the Fair Labor Standards Act and/or similar state laws. | |||||
| --- | --- |
NINE ENERGY SERVICE, INC.
RECONCILIATION OF ROIC CALCULATION
(In Thousands)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br>2022 | March 31,<br>2022 | |||||
| Net loss | $ | (978 | ) | $ | (6,899 | ) |
| Add back: | ||||||
| Interest expense | 8,133 | 8,077 | ||||
| Interest income | (25 | ) | (12 | ) | ||
| Restructuring charges | 805 | 285 | ||||
| After-tax net operating income | $ | 7,935 | $ | 1,451 | ||
| Total capital as of prior period-end: | ||||||
| Total stockholders’ equity (deficit) | $ | (45,366 | ) | $ | (39,267 | ) |
| Total debt | 341,511 | 337,436 | ||||
| Less: cash and cash equivalents | (19,941 | ) | (21,509 | ) | ||
| Total capital as of prior period-end: | $ | 276,204 | $ | 276,660 | ||
| Total capital as of period-end: | ||||||
| Total stockholders’ equity (deficit) | $ | (46,319 | ) | $ | (45,366 | ) |
| Total debt | 348,148 | 341,511 | ||||
| Less: cash and cash equivalents | (22,408 | ) | (19,941 | ) | ||
| Total capital as of period-end: | $ | 279,421 | $ | 276,204 | ||
| Average total capital | $ | 277,813 | $ | 276,432 | ||
| ROIC | 11.4 | % | 2.1 | % |
NINE ENERGY SERVICE, INC.
RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
| Three Months Ended | ||||
|---|---|---|---|---|
| June 30,<br>2022 | March 31,<br>2022 | |||
| Calculation of gross profit | ||||
| Revenues | $ | 142,346 | $ | 116,935 |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 112,741 | 94,318 | ||
| Depreciation (related to cost of revenues) | 6,055 | 6,049 | ||
| Amortization of intangibles | 3,768 | 3,904 | ||
| Gross profit | $ | 19,782 | $ | 12,664 |
| Adjusted gross profit reconciliation | ||||
| Gross profit | $ | 19,782 | $ | 12,664 |
| Depreciation (related to cost of revenues) | 6,055 | 6,049 | ||
| Amortization of intangibles | 3,768 | 3,904 | ||
| Adjusted gross profit | $ | 29,605 | $ | 22,617 |
NINE ENERGY SERVICE, INC.
RECONCILIATION OF ADJUSTED NET LOSS AND ADJUSTED BASIC EARNINGS (LOSS) PER SHARE CALCULATION
(In Thousands)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br>2022 | March 31,<br>2022 | |||||
| Reconciliation of adjusted net loss: | ||||||
| Net loss | $ | (978 | ) | $ | (6,899 | ) |
| Add back: | ||||||
| Restructuring charges | 805 | 285 | ||||
| Adjusted net loss | $ | (173 | ) | $ | (6,614 | ) |
| Weighted average shares | ||||||
| Weighted average shares outstanding for basic and adjusted basic earnings (loss) per<br>share | 30,832,566 | 30,491,976 | ||||
| Loss per share: | ||||||
| Basic loss per share | $ | (0.03 | ) | $ | (0.23 | ) |
| Adjusted basic loss per share | $ | (0.01 | ) | $ | (0.22 | ) |
| ^A^ | Adjusted EBITDA is defined as net income (loss) before interest, taxes, and depreciation and amortization,<br>further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) loss or gain on revaluation of contingent liabilities,<br>(iv) loss or gain on the extinguishment of debt, (v) loss or gain on the sale of subsidiaries, (vi) restructuring charges, (vii) stock-based compensation and cash award expense, (viii) loss or gain on sale of property and<br>equipment, and (ix) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of<br>business. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Management believes Adjusted EBITDA and Adjusted EBITDA margin are useful because they allow us to more effectively evaluate our operating performance and compare the<br>results of our operations from period to period without regard to our financing methods or capital structure and help identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments, acquisitions and<br>dispositions and costs that are not reflective of the ongoing performance of our business. | |||||
| --- | --- | |||||
| ^B^ | Return on Invested Capital (“ROIC”) is defined as after-tax<br>net operating profit (loss), divided by average total capital. We define after-tax net operating profit (loss) as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment<br>impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) interest expense (income), (iv) restructuring charges, (v) loss (gain) on the sale of subsidiaries, (vi) loss (gain) on extinguishment of<br>debt, and (vii) the provision (benefit) for deferred income taxes. We define total capital as book value of equity (deficit) plus the book value of debt less balance sheet cash and cash equivalents. We compute the average of the current and<br>prior period-end total capital for use in this analysis. Management believes ROIC provides useful information because it quantifies how well we generate operating income relative to the capital we have<br>invested in our business and illustrates the profitability of a business or project taking into account the capital invested. | |||||
| --- | --- | |||||
| ^C^ | Adjusted Net Income (Loss) is defined as net income (loss) adjusted for (i) goodwill, intangible asset,<br>and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) restructuring charges, (iv) loss or gain on the sale of subsidiaries, (v) loss or gain on the extinguishment<br>of debt and (vi) the tax impact of such adjustments. Management believes Adjusted Net Income (Loss) is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to<br>period and helps identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions. | |||||
| --- | --- | |||||
| ^D^ | Adjusted Basic Earnings (Loss) Per Share is defined as adjusted net income (loss), divided by weighted average<br>basic shares outstanding. Management believes Adjusted Basic Earnings (Loss) Per Share is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period and help<br>identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions. | |||||
| --- | --- | |||||
| ^E^ | Adjusted Gross Profit (Loss) is defined as revenues less cost of revenues excluding depreciation and<br>amortization. This measure differs from the GAAP definition of gross profit (loss) because we do not include the impact of depreciation and amortization, which represent non-cash expenses. Our management uses<br>adjusted gross profit (loss) to evaluate operating performance. We prepare adjusted gross profit (loss) to eliminate the impact of depreciation and amortization because we do not consider depreciation and amortization indicative of our core<br>operating performance. | |||||
| --- | --- |