The following discussion and analysis should be read in conjunction with the historical financial statements and related notes included in Part I, Item 1. Financial Statements of this Quarterly Report on Form 10-Q (the "Quarterly Report"). This discussion contains "forward-looking statements" reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil and natural gas, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this report. Please read Cautionary Note Regarding Forward-Looking Statements. Also, please read the risk factors and other cautionary statements described under Part II, Item 1A.-"Risk Factors" included elsewhere in this Quarterly Report and in our Annual Report filed on Form 10-K for the year endedDecember 31, 2019 (our "Annual Report"). We assume no obligation to update any of these forward-looking statements. Overview Our service offerings consist of well completion support, workover, well maintenance, wireline, fluid management, other complementary services, as well as installation, commissioning and operating of modular equipment, which are conducted in three reportable segments, as follows: •High Specification Rigs. Provides high-specification ("high-spec") well service rigs and complementary equipment and services to facilitate operations throughout the lifecycle of a well. •Completion and Other Services. Provides wireline completion services necessary to bring a well on production and other ancillary services often utilized in conjunction with our high-spec rig services to enhance the production of a well. •Processing Solutions. Provides proprietary, modular equipment for the processing of natural gas. For additional financial information about our segments, please see "Item 1. Financial Information - Note 13 - Segment Reporting." Recent Events and Outlook The outbreak of the novel coronavirus ("COVID-19") in the first quarter of 2020 and its continued spread across the globe in the second and third quarters of 2020 has resulted, and is likely to continue to result, in significant economic disruption and has, and will likely continue to, adversely affect the operations of the Company's business, as the significantly reduced global and national economic activity has resulted in reduced demand for oil and natural gas. Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various containment measures, which included the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe decline in general economic activity and a resulting decrease in energy demand. In addition, the global economy has experienced a significant disruption to global supply chains. The risks associated with the COVID-19 pandemic have impacted our workforce and the way we meet our business objectives. The extent of the COVID-19 outbreak on the Company's operational and financial performance will significantly depend on certain developments, including the duration and spread of the outbreak and its continued impact on customer activity and third-party providers. The direct impact to the Company's operations began to take affect at the close of the first quarter endedMarch 31, 2020 and continued through the close of the third quarter endedSeptember 30, 2020 ; however the full extent to which the COVID-19 outbreak may affect the Company's financial conditions, results of operations or liquidity subsequent to the issuance of these financial statements is uncertain. At the time of this filing, cases of COVID-19 in theU.S. were remain high, including inTexas , where we conduct significant operations. COVID-19 and numerous public and political responses thereto have contributed to equity market volatility and potentially the risk of a global recession. We expect this global equity market volatility experienced during 2020 to continue at least until the outbreak of COVID-19 stabilizes, if not longer. The response to the COVID-19 outbreak (such as stay-at-home orders, closures of restaurants and banning of group gatherings) and slowing of the global economy has contributed to increased unemployment rates. The severe drop in economic activity, travel restrictions and other restrictions due to COVID-19 have had a significant negative impact on the demand for oil and gas. In addition to the impact of the COVID-19 outbreak, inMarch 2020 ,OPEC ,Russia and certain other oil producing states, commonly referred to as "OPEC Plus," failed to agree on a plan to cut production of oil and natural gas. Subsequently,Saudi Arabia announced plans to increase production to record levels and reduce the prices at which they sell oil and, in turn,Russia responded with threats to also increase production. Collectively, these events created an unprecedented global oil and natural gas supply and demand imbalance, reduced global oil and natural gas storage capacity, 18 -------------------------------------------------------------------------------- caused oil and natural gas prices to decline significantly and resulted in continued volatility in oil, natural gas and NGLs prices into the third quarter of 2020. OnApril 12, 2020 , OPEC Plus agreed to cut oil production by 9.7 million barrels per day in May andJune 2020 ; however, onJuly 15, 2020 OPEC Plus agreed to increase production by 1.6 million barrels per day starting inAugust 2020 . With the combined effects of the increased production levels earlier in 2020, the recent increase in production and the reduction in demand caused by COVID-19, the global oil and natural gas supply and demand imbalance persists and continues to have a significant adverse effect on the oil and gas industry. OPEC Plus is scheduled to meet again in the fourth quarter of 2020 and it is possible OPEC Plus may decide to further production increases. Due to the significantly reduced demand for oil and natural gas as a result of the COVID-19 pandemic and the current oversupply of oil and natural gas in the market, available storage and capacity for our customers' production may be limited or completely unavailable in the future, which may further negatively impact the price of oil. We cannot predict whether or when the global supply and demand imbalance will be resolved or whether or when oil and natural gas production and economic activities will return to normalized levels. In the absence of additional reductions to global production, oil, natural gas and NGLs prices could remain at current levels, or decline further, for an extended period of time. Factors deriving from the COVID-19 response, as well as the oil oversupply, that have and may continue to negatively impact sales, liquidity and gross margins in the future include, but are not limited to: limitations on the ability of our suppliers to provide materials or equipment, limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state or federal orders requiring employees to remain at home; reduction of capital expenditures and discretionary spend; limitations on the ability of our customers to conduct business; and limitations on the ability of our customers to pay us on a timely basis. If prolonged, such factors may also negatively affect the carrying values of our property and equipment and intangible assets. As of the date of this report, the Company successfully implemented cost reductions throughout the organization, including a reduction in workforce of approximately 50% and salary reductions across the Company's organizational structure, which has reduced payroll expense by more than 60% since the beginning of 2020. Additionally, we have made various other operational, travel and organizational expense reductions and will continue to manage costs to preserve liquidity through this downturn. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers and stakeholders. Currently, we expect to have sufficient liquidity to operate our business and remain in compliance with the financial covenants under our Credit Facility agreement for at least the next 12 months from the date of issuance of these financial statements. TheU.S. government has implemented a number of programs in the wake of the impacts of COVID-19, including the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the largest relief package inU.S. history, and the Main Street Lending Program established by theFederal Reserve . Although we qualified for limited aid under the CARES Act related to the deferment of certain employer taxes, the Company is currently evaluating whether it can meet the conditions of and benefit from the Main Street Lending Program. How We Evaluate Our Operations Management uses a variety of metrics to analyze our operating results and profitability, which include operating revenues, cost of conducting our operations, operating income (loss) and adjusted EBITDA, among others. Within our High Specification Rig segment, management uses additional metrics to analyze our activity levels and profitability, including, rig hours and rig utilization. How We Generate Revenues We currently generate revenues through the provision of a variety of oilfield services. These services are performed under a variety of contract structures, including a long term take-or-pay contract and various master service agreements, as supplemented by statements of work, pricing agreements and specific quotes. A portion of our master services agreements include provisions that establish pricing arrangements for a period of up to one year in length. However, the majority of those agreements provide for pricing adjustments based on market conditions. The majority of our services are priced based on prevailing market conditions and changing input costs at the time the services are provided, giving consideration to the specific requirements of the customer. We analyze our revenues by comparing actual revenues to our internal projections for a given period and to prior periods to assess our performance. We believe that revenues are a meaningful indicator of the demand and pricing for our services. Rig Hours Within our High Specification Rig segment, we analyze rig hours as an important indicator of our activity levels and profitability. Rig hours represent the aggregate number of hours that our well service rigs actively worked during the periods presented. We typically bill customers for our well services on an hourly basis during the period that a well service rig is actively working, making rig hours a useful metric for evaluating our profitability. 19 -------------------------------------------------------------------------------- Rig Utilization Within our High Specification Rig segment, we analyze rig utilization as a further important indicator of our activity levels and profitability. We measure rig utilization by reference to average monthly hours per rig, which is calculated by dividing (a) the approximate, aggregate operating well service rig hours for the periods presented by (b) the aggregate number of high-spec rigs in our fleet during such period, as aggregated on a monthly basis utilizing a mid-month convention whereby a high-spec rig added to our fleet during a month, meaning that we have taken delivery of such high-spec rig and it is ready for service, assumed to be in our fleet for one half of such month. We believe that rig utilization as measured by average monthly hours per high-spec rig is a meaningful indicator of the operational efficiency of our core revenue-producing assets, market demand for our well services and our ability to profitably capitalize on such demand. Our evaluation of our rig utilization as measured by average monthly hours per rig may not be comparable to that of our competitors. The primary factors that have historically impacted, and will likely continue to impact, our actual aggregate well service rig hours for any specified period are: (i) customer demand, which is influenced by factors such as commodity prices, the complexity of well completion operations and technological advances in our industry, and (ii) our ability to meet such demand, which is influenced by changes in our fleet size and resulting rig availability, as well as weather, employee availability and related factors. The primary factors that have historically impacted, and will likely continue to impact, the aggregate number of high-spec rigs in our fleet during any specified period are the extent and timing of changes in the size of our well service rig fleet to meet short-term and expected long-term demand, and our ability to successfully maintain a fleet capable of ensuring sufficient, but not excessive, rig availability to meet such demand. Costs of Conducting Our Business The principal expenses involved in conducting our business are personnel, repairs and maintenance costs as well as other direct material costs, general and administrative, depreciation and amortization and interest expense. We manage the level of our expenses, except depreciation and amortization and interest expense, based on several factors, including industry conditions and expected demand for our services. In addition, a significant portion of the costs we incur in our business is variable based on the quantities of specific services provided and the requirements of such services. Direct cost of services and general and administrative expenses include the following major cost categories: (i) personnel costs; and (ii) equipment costs, including repair and maintenance. Personnel costs associated with our operational employees represent a significant cost of our business. A substantial portion of our labor costs is attributable to our crews and is partly variable based on the requirements of specific customers and operations. A key component of personnel costs relate to the ongoing training of our employees, which improves safety rates and reduces attrition. We also incur costs to employ personnel to support our services and perform maintenance on our assets. Costs for these employees are not directly tied to our level of business activity. During the nine months endedSeptember 30, 2020 , the Company significantly reduced the workforce due to the impacts of the COVID-19 and geopolitical events that have recently taken place. Additionally, we implemented salary reductions across our organizational structure. The combined impact of the workforce reduction and salary reductions has resulted in payroll expense decreasing by more than 60% since the beginning of 2020. We will continue to actively manage costs and take further actions as necessary. See "-Recent Events and Outlook" above. Operating Income (Loss) We analyze our operating income (loss), which we define as revenues less cost of services, general and administrative expenses, depreciation and amortization, impairment and other operating expenses, to measure our financial performance. We believe operating income (loss) is a meaningful metric because it provides insight on profitability and true operating performance based on the historical cost basis of our assets. We also compare operating income (loss) to our internal projections for a given period and to prior periods. Adjusted EBITDA We view Adjusted EBITDA, which is a financial measure not determined in accordance with generally accepted accounting principles inthe United States ("U.S. GAAP"), as an important indicator of performance. We define Adjusted EBITDA as net income (loss) before net interest expense, income tax provision or benefit, depreciation and amortization, equity-based compensation, acquisition-related and severance costs, gain or loss on disposal of assets and other non-cash and certain items that we do not view as indicative of our ongoing performance. See "Results of Operations-Note Regarding Non-GAAP Financial Measure" for more information and reconciliations of net income (loss) to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance withU.S. GAAP. 20 -------------------------------------------------------------------------------- Results of Operations Three Months EndedSeptember 30, 2020 compared to Three Months EndedSeptember 30, 2019 The following is an analysis of our operating results. See "-How We Evaluate Our Operations" for definitions of rig hours, rig utilization and other analogous information. Three Months Ended September 30, Change 2020 2019 $ % Revenues High specification rigs$ 14.5 $ 32.5 $ (18.0) (55) % Completion and other services 18.9 45.3 (26.4) (58) % Processing solutions 1.2 6.3 (5.1) (81) % Total revenues 34.6 84.1 (49.5) (59) % Operating expenses Cost of services (exclusive of depreciation and amortization): High specification rigs 12.3 29.3 (17.0) (58) % Completion and other services 14.0 34.6 (20.6) (60) % Processing solutions 0.3 2.8 (2.5) (89) % Total cost of services 26.6 66.7 (40.1) (60) % General and administrative 4.6 6.7 (2.1) (31) % Depreciation and amortization 8.4 9.1 (0.7) (8) % Total operating expenses 39.6 82.5 (42.9) (52) % Operating income (loss) (5.0) 1.6 (6.6) (413) % Other expenses Interest expense, net 0.8 1.4 (0.6) (43) % Total other expenses 0.8 1.4 (0.6) (43) % Income (loss) before income tax expense (5.8) 0.2 (6.0) (3000) % Tax expense (benefit) (0.1) 1.1 (1.2) (109) % Net income (loss)$ (5.7) $ (0.9) $ (4.8) 533 % Revenues. Revenues for the three months endedSeptember 30, 2020 decreased$49.5 million , or 59%, to$34.6 million from$84.1 million for the three months endedSeptember 30, 2019 . The decrease in revenues, across all reporting segments, is due to the deterioration of crude oil pricing and significantly reduced demand for our services during the three months endedSeptember 30, 2020 , as described in "-Recent Events and Outlook" above. The change in revenues by segment was as follows: High Specification Rigs. High Specification Rig revenues for the three months endedSeptember 30, 2020 decreased$18.0 million , or 55%, to$14.5 million from$32.5 million for the three months endedSeptember 30, 2019 . The decrease in rig services revenue included a 52% decrease in total rig hours to 30,200 for the three months endedSeptember 30, 2020 from 62,400 for the three months endedSeptember 30, 2019 . The decreased rig hours attributed to a 51% reduction in rig utilization. The average revenue per rig hour decreased seven percent to$480 from$519 for the three months endedSeptember 30, 2019 . Completion and Other Services. Completion and Other Services revenues for the three months endedSeptember 30, 2020 decreased$26.4 million , or 58%, to$18.9 million from$45.3 million for the three months endedSeptember 30, 2019 . The decrease was primarily attributable to our wireline business, which accounted for approximately$16.7 million , or 63%, of the segment revenue decrease. The decrease in wireline services revenue included a 40% decrease in active wireline units to six units as ofSeptember 30, 2020 from ten units as ofSeptember 30, 2019 . All other service lines also had comparable revenue reductions. Processing Solutions. Processing Solutions revenues for the three months endedSeptember 30, 2020 decreased$5.1 million , or 81%, to$1.2 million from$6.3 million for the three months endedSeptember 30, 2019 . The decrease was primarily attributable to a decline in mobilization and maintenance revenue related to our Mechanical Refrigeration Units ("MRU"), which was attributable to a decline in MRU utilization. Our MRU utilization decreased to nine percent as ofSeptember 30, 2020 , from 52% as ofSeptember 30, 2019 , which accounted for approximately$1.5 million , or 33%, of the revenue decline. 21 -------------------------------------------------------------------------------- The MRU utilization decrease was due to certain of our customer contracts that terminated during 2020, as scheduled, without renewal. Cost of services (excluding depreciation and amortization shown separately). Cost of services for the three months endedSeptember 30, 2020 decreased$40.1 million , or 60%, to$26.6 million from$66.7 million for the three months endedSeptember 30, 2019 . As a percentage of revenue, cost of services was 77% and 79% for the three months endedSeptember 30, 2020 and 2019, respectively. The decline in cost of services, across all segments, corresponds with the decreased demand for our services, as described in "-Recent Events and Outlook," above and is primarily attributable to a reduction in variable employee costs related to the reduction in our workforce. The change in cost of services by segment was as follows: High Specification Rigs. High Specification Rig cost of services for the three months endedSeptember 30, 2020 decreased$17.0 million , or 58% to$12.3 million from$29.3 million for the three months endedSeptember 30, 2019 . The decrease was primarily attributable to a reduction in variable expenses, notably employee costs and repair and maintenance costs. Completion and Other Services. Completion and Other Services cost of services for the three months endedSeptember 30, 2020 decreased$20.6 million , or 60%, to$14.0 million from$34.6 million for the three months endedSeptember 30, 2019 . The decrease was primarily attributable to a reduction in the wireline business, which accounted for approximately$13.9 million , or 64%, of the segment cost of sales decrease. The decrease was primarily attributable to a reduction in variable expenses related to employee costs and direct material costs across all service lines. Processing Solutions. Processing Solutions cost of services for the three months endedSeptember 30, 2020 decreased$2.5 million , or 89%, to$0.3 million from$2.8 million for the three months endedSeptember 30, 2019 . The decrease was primarily attributable to a reduction in employee costs and costs associated with ancillary equipment rentals, corresponding with a decrease in revenue. General & Administrative. General and administrative expenses decreased$2.1 million , or 31%, to$4.6 million for the three months endedSeptember 30, 2020 compared to$6.7 million for the three months endedSeptember 30, 2019 . The decrease is attributable to lower employee costs, which is related to our reduction in workforce, and lower professional fees during the three months endedSeptember 30, 2020 . Depreciation and Amortization. Depreciation and amortization for the three months endedSeptember 30, 2020 decreased$0.7 million , or 8%, to$8.4 million from$9.1 million for the three months endedSeptember 30, 2019 . The decrease is attributable to depreciation expense for fixed assets placed into service during the trailing 12 months, partially offset by asset retirements. Interest Expense, net. Interest expense, net for the three months endedSeptember 30, 2020 decreased$0.6 million , or 43%, to$0.8 million from$1.4 million for the three months endedSeptember 30, 2019 . The decrease to net interest expense was attributable to the reduction of the principal balances on our Encina Master Financing Agreement and Credit Facility, coupled with a decrease in London Interbank Offering Rate ("LIBOR"). 22 -------------------------------------------------------------------------------- Nine Months EndedSeptember 30, 2020 compared to Nine Months EndedSeptember 30, 2019 The following is an analysis of our operating results. See "-How We Evaluate Our Operations" for definitions of rig hours, rig utilization and other analogous information. Nine Months Ended September 30, Change 2020 2019 $ % Revenues High specification rigs$ 60.8 $ 97.3 $ (36.5) (38) % Completion and other services 79.9 143.2 (63.3) (44) % Processing solutions 5.6 16.2 (10.6) (65) % Total revenues 146.3 256.7 (110.4) (43) % Operating expenses Cost of services (exclusive of depreciation and amortization): High specification rigs 52.3 85.4 (33.1) (39) % Completion and other services 59.0 107.5 (48.5) (45) % Processing solutions 2.2 6.9 (4.7) (68) % Total cost of services 113.5 199.8 (86.3) (43) % General and administrative 15.1 20.2 (5.1) (25) % Depreciation and amortization 26.8 25.9 0.9 3 % Total operating expenses 155.4 245.9 (90.5) (37) % Operating income (loss) (9.1) 10.8 (19.9) (184) % Other expenses Interest expense, net 2.7 4.6 (1.9) (41) % Total other expenses 2.7 4.6 (1.9) (41) % Income (loss) before income tax expense (11.8) 6.2 (18.0) (290) % Tax expense (benefit) - 1.7 (1.7) (100) % Net income (loss)$ (11.8) $ 4.5 $ (16.3) (362) % Revenues. Revenues for the nine months endedSeptember 30, 2020 decreased$110.4 million , or 43%, to$146.3 million from$256.7 million for the nine months endedSeptember 30, 2019 . The decrease in revenues, across all reporting segments, is due to the deterioration of crude oil pricing and significantly reduced demand for our services during the nine months endedSeptember 30, 2020 , as described in "-Recent Events and Outlook" above. The change in revenues by segment was as follows: High Specification Rigs. High Specification Rig revenues for the nine months endedSeptember 30, 2020 decreased$36.5 million , or 38%, to$60.8 million from$97.3 million for the nine months endedSeptember 30, 2019 . The decrease in rig services revenue included a 36% decrease in total rig hours to 117,200 for the nine months endedSeptember 30, 2020 from 184,700 for the nine months endedSeptember 30, 2019 . The decreased rig hours drove a 36% decrease in rig utilization. Our average revenue per rig hour decreased one percent to$518 from$524 for the nine months endedSeptember 30, 2019 . Completion and Other Services. Completion and Other Services revenues for the nine months endedSeptember 30, 2020 decreased$63.3 million , or 44%, to$79.9 million from$143.2 million for the nine months endedSeptember 30, 2019 . The decrease is primarily attributable to our wireline business, which accounted for$40.0 million , or 63%, of the revenue decrease. The decrease in wireline revenue included a 40% reduction in active wireline units to six units as ofSeptember 30, 2020 from ten units as ofSeptember 30, 2019 . All other service lines also had revenue reductions. Processing Solutions. Processing Solutions revenues for the nine months endedSeptember 30, 2020 decreased$10.6 million , or 65%, to$5.6 million from$16.2 million for the nine months endedSeptember 30, 2019 . The decrease was primarily attributable to a reduction in MRU utilization to nine percent as ofSeptember 30, 2020 , from 52% as ofSeptember 30, 2019 , which accounted for approximately$4.3 million , or 77%, of the revenue decline. The MRU utilization decrease was due to certain of our customer contracts that terminated during 2020, as scheduled, without renewal. 23 -------------------------------------------------------------------------------- Cost of services (excluding depreciation and amortization shown separately). Cost of services for the nine months endedSeptember 30, 2020 decreased$86.3 million , or 43%, to$113.5 million from$199.8 million for the nine months endedSeptember 30, 2019 . As a percentage of revenue, cost of services was approximately 78% for both the nine months endedSeptember 30, 2020 and 2019. The decline in cost of services, across all segments, corresponds with the decreased demand for our services, as described "-Recent Events and Outlook," above and is primarily attributable to a reduction in employee costs, as a result of a significant reduction in work force. The change in cost of services by segment was as follows: High Specification Rigs. High Specification Rig cost of services for the nine months endedSeptember 30, 2020 decreased$33.1 million , or 39%, to$52.3 million from$85.4 million for the nine months endedSeptember 30, 2019 . The decrease was primarily attributable to a reduction in variable expenses, notably employee costs and repair and maintenance costs, corresponding with a decrease in total rig hours and utilization rates. Completion and Other Services. Completion and Other Services cost of services for the nine months endedSeptember 30, 2020 decreased$48.5 million , or 45%, to$59.0 million from$107.5 million for the nine months endedSeptember 30, 2019 . The segment decrease was primarily attributable to a reduction in our wireline business, which accounted for$30.0 million , or 61% of the segment decrease. The decrease was primarily attributable to a reduction in variable expenses related to employee costs and direct material costs across all service lines. Processing Solutions. Processing Solutions cost of services for the nine months endedSeptember 30, 2020 decreased$4.7 million , or 68%, to$2.2 million from$6.9 million for the nine months endedSeptember 30, 2019 . The decrease was primarily attributable to a reduction in labor costs and costs associated with ancillary equipment rentals, corresponding with a decrease in revenue. General & Administrative. General and administrative expenses for the nine months endedSeptember 30, 2020 decreased$5.1 million , or 25%, to$15.1 million from$20.2 million for the nine months endedSeptember 30, 2019 . The decrease is attributable to the gain on debt retirement of$2.1 million related to the settlement of the ESCO Seller's Notes during the nine months endedSeptember 30, 2020 , as well as lower employee costs and lower professional fees. Depreciation and Amortization. Depreciation and amortization for the nine months endedSeptember 30, 2020 decreased$0.9 million , or 3%, to$26.8 million from$25.9 million for the nine months endedSeptember 30, 2019 . The decrease is attributable to depreciation expense for fixed assets placed into service during the trailing 12 months, partially offset by asset retirements. Interest Expense, net. Interest expense, net for the nine months endedSeptember 30, 2020 decreased$1.9 million , or 41%, to$2.7 million from$4.6 million for the nine months endedSeptember 30, 2019 . The decrease to net interest expense was attributable to the reduction of the principal balances on our Encina Master Financing Agreement and Credit Facility, coupled with a decrease in LIBOR. Note Regarding Non-GAAP Financial Measure Adjusted EBITDA is not a financial measure determined in accordance withU.S. GAAP. We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax provision (benefit), depreciation and amortization, equity-based compensation, acquisition-related, severance and reorganization costs, impairment of goodwill, gain or loss on disposal of assets and certain other items that we do not view as indicative of our ongoing performance. We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net loss determined in accordance withU.S. GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from Adjusted EBITDA. Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies. The following table presents reconciliations of net income (loss) to Adjusted EBITDA, our most directly comparable financial measure calculated and presented in accordance withU.S. GAAP. 24 -------------------------------------------------------------------------------- Three Months EndedSeptember 30, 2020 compared to Three Months EndedSeptember 30, 2019 The following is an analysis of our Adjusted EBITDA. See "Item 1. Financial Information-Note 13-Segment Reporting" and "-Results of Operations" for further details.
Three Months Ended
High Specification Completion and Processing Rigs Other Services Solutions Other Total (in millions) Net income (loss) $ (2.4) $ 2.2$ 0.2 $ (5.7) $ (5.7) Interest expense, net - - - 0.8 0.8 Tax expense (benefit) - - - (0.1) (0.1) Depreciation and amortization 4.6 2.7 0.7 0.4 8.4 Equity based compensation - - - 1.1 1.1 Severance and reorganization costs - - - (0.4) (0.4) Loss on disposal of property and equipment 0.2 0.1 - - 0.3 Adjusted EBITDA $ 2.4 $ 5.0$ 0.9 $ (3.9) $ 4.4
Three Months Ended
High Specification Completion and Processing Rigs Other Services Solutions Other Total (in millions) Net income (loss) $ (2.1) $ 7.8$ 2.9 $ (9.5) $ (0.9) Interest expense, net - - - 1.4 1.4 Tax expense (benefit) - - - 1.1 1.1 Depreciation and amortization 5.3 2.9 0.6 0.3 9.1 Equity based compensation - - - 0.9 0.9 Severance and reorganization costs 0.1 - - - 0.1 Loss on disposal of property and equipment - - - 0.5 0.5 Adjusted EBITDA $ 3.3 $ 10.7$ 3.5 $ (5.3) $ 12.2 Change $ High Specification Completion and Processing Rigs Other Services Solutions Other Total (in millions) Net income (loss) $ (0.3) $ (5.6)$ (2.7) $ 3.8 $ (4.8) Interest expense, net - - - (0.6) (0.6) Tax expense (benefit) - - - (1.2) (1.2) Depreciation and amortization (0.7) (0.2) 0.1 0.1 (0.7) Equity based compensation - - - 0.2 0.2 Severance and reorganization costs (0.1) - - (0.4) (0.5) Loss on disposal of property and equipment 0.2 0.1 - (0.5) (0.2) Adjusted EBITDA $ (0.9) $ (5.7)$ (2.6) $ 1.4 $ (7.8) Adjusted EBITDA for the three months endedSeptember 30, 2020 decreased$7.8 million to$4.4 million from$12.2 million for the three months endedSeptember 30, 2019 . The change by segment was as follows: High Specification Rigs. High Specification Rigs Adjusted EBITDA for the three months endedSeptember 30, 2020 decreased$0.9 million to$2.4 million from$3.3 million for the three months endedSeptember 30, 2019 , due to decreased revenues of$18.0 million , partially offset by a corresponding decrease in cost of services of$17.0 million . Completion and Other Services. Completion and Other Services Adjusted EBITDA for the three months endedSeptember 30, 2020 decreased$5.7 million to$5.0 million from$10.7 million for the three months endedSeptember 30, 2019 , due to a decrease in revenues of$26.4 million , partially offset by a corresponding decrease in cost of services of$20.6 million . 25 -------------------------------------------------------------------------------- Processing Solutions. Processing Solutions Adjusted EBITDA for the three months endedSeptember 30, 2020 decreased$2.6 million to$0.9 million from$3.5 million for the three months endedSeptember 30, 2019 , due to a decrease in revenue of$5.1 million , partially offset by a corresponding decrease in cost of services of$2.5 million . Other. Other Adjusted EBITDA for the three months endedSeptember 30, 2020 increased$1.4 million to a loss of$3.9 million from a loss of$5.3 million for the three months endedSeptember 30, 2019 . The balances included in Other reflect other general and administrative costs, which are not directly attributable to High Specification Rigs, Completion and Other Services or Processing Solutions. The increase was primarily due to a reduction in the Company's general and administrative costs. Nine Months EndedSeptember 30, 2020 compared to Nine Months EndedSeptember 30, 2019 The following is an analysis of our Adjusted EBITDA. See "Item 1. Financial Information-Note 13-Segment Reporting" and "-Results of Operations" for further details.
Nine Months Ended
High Specification Completion and Processing Rigs Other Services Solutions Other Total (in millions) Net income (loss) $ (6.6) $ 12.9$ 0.8 $ (18.9) $ (11.8) Interest expense, net - - - 2.7 2.7 Tax expense (benefit) - - - - - Depreciation and amortization 15.1 8.0 2.6 1.1 26.8 Equity based compensation - - - 2.8 2.8 Severance and reorganization costs 0.4 0.2 - - 0.6 Gain on retirement of debt - - - (2.1) (2.1) Loss on disposal of property and equipment 0.2 0.1 - (0.3) - Adjusted EBITDA $ 9.1 $ 21.2$ 3.4 $ (14.7) $ 19.0
Nine Months Ended
High Specification Completion and Processing Rigs Other Services Solutions Other Total (in millions) Net income (loss) $ (3.0) $ 27.1$ 7.7 $ (27.3) $ 4.5 Interest expense, net - - - 4.6 4.6 Tax expense (benefit) - - - 1.7 1.7 Depreciation and amortization 14.9 8.6 1.6 0.8 25.9 Equity based compensation - - - 2.4 2.4 Severance and reorganization costs 0.1 - - - 0.1 Gain on retirement of debt - - - - - Loss on disposal of property and equipment - - - 0.2 0.2 Adjusted EBITDA $ 12.0 $ 35.7$ 9.3 $ (17.6) $ 39.4 Change $ High Specification Completion and Processing Rigs Other Services Solutions Other Total (in millions) Net income (loss) $ (3.6)$ (14.2) $ (6.9) $ 8.4 $ (16.3) Interest expense, net - - - (1.9) (1.9) Tax expense - - - (1.7) (1.7) Depreciation and amortization 0.2 (0.6) 1.0 0.3 0.9 Equity based compensation - - - 0.4 0.4 Severance and reorganization costs 0.3 0.2 - - 0.5 Gain on retirement of debt - - - (2.1) (2.1) Loss on disposal of property and equipment 0.2 0.1 - (0.5) (0.2) Adjusted EBITDA $ (2.9)$ (14.5) $ (5.9) $ 2.9 $ (20.4) 26
-------------------------------------------------------------------------------- Adjusted EBITDA for the nine months endedSeptember 30, 2020 decreased$20.4 million to$19.0 million from$39.4 million for the nine months endedSeptember 30, 2019 . The change by segment was as follows: High Specification Rigs. High Specification Rigs Adjusted EBITDA for the nine months endedSeptember 30, 2020 decreased$2.9 million to$9.1 million from$12.0 million for the nine months endedSeptember 30, 2019 , due to decreased revenues of$36.5 million , partially offset by a corresponding decrease in cost of services of$33.1 million . Completion and Other Services. Completion and Other Services Adjusted EBITDA for the nine months endedSeptember 30, 2020 decreased$14.5 million to$21.2 million from$35.7 million for the nine months endedSeptember 30, 2019 , due to decreased revenues of$63.3 million , partially offset by a corresponding decrease in cost of services of$48.5 million . Processing Solutions. Processing Solutions Adjusted EBITDA for the nine months endedSeptember 30, 2020 decreased$5.9 million to$3.4 million from$9.3 million for the nine months endedSeptember 30, 2019 , due to decreased revenues of$10.6 million , partially offset by a corresponding decrease in cost of services of$4.7 million . Other. Other Adjusted EBITDA for the nine months endedSeptember 30, 2020 increased$2.9 million to a loss of$14.7 million from a loss of$17.6 million for the nine months endedSeptember 30, 2019 . The balances included in Other reflect other general and administrative costs, which are not directly attributable to High Specification Rigs, Completion and Other Services or Processing Solutions. The decrease was primarily due to a reduction in the Company's general and administrative costs. Liquidity and Capital Resources Overview We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, investments and acquisitions. Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. The borrowing base under our Credit Facility is calculated monthly on a percentage of our eligible accounts receivable less certain reserves. As ofSeptember 30, 2020 , our borrowing base was reduced to$13.4 million compared to$30.5 million as ofDecember 31, 2019 , as a result of decreased accounts receivable during the period. We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements and to permit us to manage the cyclicality associated with our business. As ofSeptember 30, 2020 , we had cash on hand of$3.4 million , operating cash flows of$27.3 million and availability under our Credit Facility of$10.4 million . As ofOctober 21, 2020 , our cash on hand and available borrowings under our Credit Facility approximated$14.0 million . We currently expect to have sufficient funds to meet the Company's liquidity requirements and to stay within our covenants of our debt agreements for at least the next 12 months from the date of issuance of these financial statements. See additional information under "- Our Debt Obligations." Cash Flows The following table presents our cash flows for the periods indicated: Nine Months Ended September 30, Change 2020 2019 $ %
(in millions)
Net cash provided by operating activities
(25) % Net cash used in investing activities (5.6) (19.0) 13.4 71 % Net cash used in financing activities (25.2) (11.9) (13.3) 112 % Net change in cash$ (3.5) $ 5.4 $ (8.9) (165) % Operating Activities Net cash provided by operating activities decreased$9.0 million to cash provided of$27.3 million for the nine months endedSeptember 30, 2020 compared to cash provided of$36.3 million for the nine months endedSeptember 30, 2019 . The change in cash flows provided by operating activities is primarily attributable to cash collections related to accounts receivable, partially offset by cash payments related to our accounts payable and accrued expenses. The Company increased cash generated from working capital for the nine months endedSeptember 30, 2020 by$8.4 million , or 100%, to cash generated from working capital of$8.4 million compared to the nine months endedSeptember 30, 2019 . Investing Activities Net cash used in investing activities decreased$13.4 million to a use of cash of$5.6 million for the nine months endedSeptember 30, 2020 compared to a use of cash of$19.0 million for the nine months endedSeptember 30, 2019 . The change in 27 -------------------------------------------------------------------------------- cash flows used in investing activities is attributable to a significant reduction in capital expenditures during the current year in response to the economic events that have taken place in the industry, coupled with an increased level of fixed assets acquired during the nine months endedSeptember 30, 2019 , relative to the corresponding period of the current year. Financing Activities Net cash flows used in financing activities increased$13.3 million to a use of cash of$25.2 million for the nine months endedSeptember 30, 2020 compared to a use of cash of$11.9 million for the nine months endedSeptember 30, 2019 . The change in cash flows from financing activities is primarily attributable to repayments on the principal balance of our Credit Facility and Encina Master Financing Agreement, settlement of the ESCO Note Payable and repurchases of our Class A Common Stock during the nine months endedSeptember 30, 2020 . Supplemental Disclosures We added fixed assets of$0.1 million that were non-cash additions and added$1.0 million of fixed assets through financing leases during the nine months endedSeptember 30, 2020 . In addition, we early terminated certain of our vehicle financing leases, thereby reducing our current and long-term obligations by$1.3 million . Working Capital Our working capital, which we define as total current assets less total current liabilities, was a deficit of$1.8 million as ofSeptember 30, 2020 compared to a surplus of$3.6 million as ofDecember 31, 2019 . The reduction in the Company's operational activity, due to the current macroeconomic environment, is the primary reason for this decrease in working capital. InApril 2020 , we eliminated all planned growth capital expenditures for the remainder of 2020. While our maintenance capital expenditures have historically been low due to the quality of our asset base, we expect minimal capital expenditures for the remainder of 2020. Our Debt Agreements ESCO Notes Payable InAugust 2017 , we issued$7.0 million of Seller's Notes as partial consideration for the acquisition ofESCO Leasing, LLC ("ESCO"). These notes included a note for$1.2 million , which was paid inAugust 2018 and a note for$5.8 million , which was settled during the nine months endedSeptember 30, 2020 . Both notes bore interest at 5.0% payable quarterly until their respective maturity dates. During the year endedDecember 31, 2018 , we provided notice to ESCO that we are seeking to be indemnified for breach of contract. We exercised our right to stop payments of the remaining principal balance of$5.8 million on the Seller's Notes and any unpaid interest, pending resolution of certain indemnification claims. Interest on the outstanding principal balance was accrued through the maturity date of the Note Payable. During the nine months endedSeptember 30, 2020 , the Company paid$3.8 million to settle the note and any unpaid interest, and recognized a gain on the retirement of the note of$2.1 million . Credit Facility InAugust 2017 , we entered into a$50.0 million Credit Facility by and among certain of Ranger's subsidiaries, as borrowers, each of the lenders' party thereto andWells Fargo Bank, N.A ., as administrative agent. The Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of our eligible accounts receivable less certain reserves. The Credit Facility is scheduled to mature inAugust 2022 . The applicable margin for the LIBOR loans ranges from 1.5% to 2.0% and the applicable margin for Base Rate loans ranges from 0.5% to 1.0%, in each case, depending on our average excess availability under the Credit Facility. The applicable margin for the LIBOR loan was 1.75% and the applicable margin for Base Rate loans were 0.75% as ofSeptember 30, 2020 . The weighted average interest rate for the borrowings under the Credit Facility was 3.2% during the nine months endedSeptember 30, 2020 . EffectiveOctober 1, 2020 , the applicable margins for the LIBOR loans and Base Rate loans increased to 2.0% and 1.0%, respectively, which increases are due to the reduction of our average excess availability. The applicable margins for each of the loans are re-determined as of the first day of each calendar quarter. Under the Credit Facility, the total loan capacity was$13.4 million , which was based on a borrowing base certificate in effect as ofSeptember 30, 2020 . The Company had outstanding borrowings of$3.0 million under the Credit Facility, leaving a residual$10.4 million available for borrowings as ofSeptember 30, 2020 . As ofOctober 21, 2020 , the Company had borrowings of$3.0 million under the Credit Facility and had available borrowings of$12.1 million . We were in compliance with the Credit Facility covenants as ofSeptember 30, 2020 . 28 -------------------------------------------------------------------------------- The Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of the Company's eligible accounts receivable less certain reserves. The Credit Facility includes cash dominion provisions that permit the Administrative Agent to sweep cash daily from the Company's bank accounts into an account of the Administrative Agent to repay the Company's obligations under the Credit Facility. Such dominion is triggered when excess availability is less than the greater of$6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base as of such date of determination. When the Company is subject to dominion, for 30 consecutive days it is required to either (a) maintain excess availability in excess of the greater of$6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base as of such date of determination and no event of default has occurred and is continuing or (b) have no revolver drawings and available cash of at least$20.0 million for dominion to revert back to the Company. The Credit Facility is scheduled to mature onAugust 16, 2022 . During the three months endedMarch 31, 2020 , the Company borrowed against the Credit Facility causing dominion to revert to the Administrative Agent, however after the 30 consecutive day period, as defined above, dominion reverted back to the Company inApril 2020 . The borrowings under the Credit Facility, and related issuance costs, were included in long-term debt, net in the Condensed Consolidated Balance Sheets as ofSeptember 30, 2020 , as the Company was not subject to dominion. In addition, the Credit Facility restricts our ability to make distributions on, or redeem or repurchase, our equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Credit Facility and either (a) excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 22.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2)$10.0 million or (b) if our fixed charge coverage ratio is at least 1.0x on a pro forma basis, excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 17.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2)$7.0 million . If the foregoing threshold under clause (b) is met, we may not make such distributions (but may make certain other distributions, including under clause (a) above) prior to the earlier of the date that is (a) 12 months from closing or (b) the date that our fixed charge coverage ratio is at least 1.0x for two consecutive quarters. Our Credit Facility generally permits us to make distributions required under the Tax Receivable Agreement ("TRA"), but a "Change of Control" under the TRA constitutes an event of default under our Credit Facility, and our Credit Facility does not permit us to make payments under the TRA upon acceleration of our obligations thereunder unless no event of default exists or would result therefrom and we have been in compliance with the fixed charge coverage ratio for the most recent 12-month period on a pro forma basis. Our Credit Facility also requires us to maintain a fixed charge coverage ratio of at least 1.0x if our liquidity is less than$10.0 million until our liquidity is at least$10.0 million for 30 consecutive days. We are not subject to a fixed charge coverage ratio if we have no drawings under the Credit Facility and have at least$20.0 million of qualified cash. The Credit Facility contains events of default customary for facilities of this nature, including, but not limited, to: •events of default resulting from our failure or the failure of any guarantors to comply with covenants and financial ratios; •the occurrence of a change of control; •the institution of insolvency or similar proceedings against us or any guarantor; and •the occurrence of a default under any other material indebtedness we or any guarantor may have. Upon the occurrence and during the continuation of an event of default, subject to the terms and conditions of the Credit Facility, the lenders are able to declare any outstanding principal of our Credit Facility debt, together with accrued and unpaid interest, to be immediately due and payable and exercise other remedies. Encina Master Financing and Security Agreement InJune 2018 , we entered into a Master Financing and Security Agreement ("Financing Agreement") withEncina Equipment Finance SPV, LLC (the "Lender"). The amount available to be provided by the Lender to us under the Financing Agreement was contemplated to be not less than$35.0 million , and not to exceed$40.0 million . The first financing was required to be in an amount up to$22.0 million , which was used to acquire certain capital equipment. Subsequent to the first financing, we borrowed an additional$17.8 million , net of expenses and in two tranches, under the Financing Agreement. As ofSeptember 30, 2020 , the aggregate principal balance outstanding was$20.2 million under the Financing Agreement. The total borrowings under the Financing Agreement were borrowed in three tranches, where the amounts outstanding are payable ratably over 48 months from the time of each borrowing. The three tranches mature inJuly 2022 ,November 2022 andJanuary 2023 . The Financing Agreement is secured by a lien on certain of our high specification rig assets. 29 -------------------------------------------------------------------------------- Borrowings under the Financing Agreement bear interest at a rate per annum equal to the sum of 8.0% plus LIBOR, which was 1.5% as ofSeptember 30, 2020 . In no event will LIBOR fall below 1.5%. The Financing Agreement requires that the Company maintain leverage ratios of 2.5 to 1.0. The Company was in compliance with the covenants under the Financing Agreement as ofSeptember 30, 2020 . TRA With respect to obligations we expect to incur under our TRA (except in cases where we elect to terminate the TRA early, the TRA is terminated early due to certain mergers, asset sales, other forms of business combination or other changes of control or we have available cash but fail to make payments when due), generally we may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA or if our contractual obligations limit our ability to make these payments. Any such deferred payments under the TRA generally will accrue interest. In certain cases, payments under the TRA may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the TRA. We intend to account for any amounts payable under the TRA in accordance with ASC 450, Contingencies. Further, we intend to account for the effect of increases in tax basis and payments for such increases under the TRA arising from future redemptions as follows: •when future sales or redemptions occur, we will record a deferred tax asset for the gross amount of the income tax effect along with an offset of 85% of this as a liability payable under the TRA; the remaining difference between the deferred tax asset and tax receivable agreement liability will be recorded as additional paid-in-capital; and •to the extent we have recorded a deferred tax asset for an increase in tax basis to which a benefit is no longer expected to be realized due to lower future taxable income, we will reduce the deferred tax asset with a valuation allowance. Critical Accounting Policies and Estimates Our significant accounting policies are discussed in our Annual Report and have not materially changed sinceDecember 31, 2019 . Off-Balance Sheet Arrangements We currently have no material off-balance sheet arrangements. Emerging Growth Company Status and Smaller Reporting Company Status We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least$1.07 billion , or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds$700.0 million as of the last business day of our most recently completed second fiscal quarter, or (2) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. We have irrevocably opted out of the extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. The Company is also a "smaller reporting company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchnage Act"). Smaller reporting company means an issuer that is not an investment company, an asset-back issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that has (i) market value of common stock held by non-affiliates of less than$250 million ; or (ii) annual revenues of less than$100 million and either no common stock held by non-affiliates or a market value of common stock held by non-affiliates of less than$700 million . Smaller reporting company status is determined on an annual basis. 30 -------------------------------------------------------------------------------- CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS The information in this Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act, as amended and Section 21E of the Exchange Act. All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words "could," "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in our Annual Report. These forward-looking statements are based on management's current belief, based on currently available information, as to the outcome and timing of future events. Forward-looking statements may include statements about: •our business strategy; •our operating cash flows, the availability of capital and our liquidity; •our future revenue, income and operating performance; •the volatility in global crude oil demand and crude oil prices for an uncertain period of time that may lead to a significant reduction of domestic crude oil and natural gas production; •global or national health concerns, including pandemics such as the outbreak of COVID-19; •uncertainty regarding future actions of foreign oil producers, such asSaudi Arabia andRussia , and the risk that they take actions that will cause an over-supply of crude oil; •our ability to sustain and improve our utilization, revenues and margins; •our ability to maintain acceptable pricing for our services; •our future capital expenditures; •our ability to finance equipment, working capital and capital expenditures; •competition and government regulations; •our ability to obtain permits and governmental approvals; •pending legal or environmental matters; •marketing of oil and natural gas; •business or asset acquisitions; •general economic conditions; •credit markets; •our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; •uncertainty regarding our future operating results; and •plans, objectives, expectations and intentions contained in this report that are not historical. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, the risks described under "Risk Factors" in our Annual Report previously filed. Should one or more of the risks or uncertainties described occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report. 31
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