NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)
|
Organization and Basis of Presentation
|
Description of Business
Heckmann Corporation, a Delaware corporation, together with its subsidiaries (collectively, the Company, we, us or our), is an environmental solutions
company providing full-cycle environmental solutions to our customers in energy and industrial end-markets. The Company focuses on the delivery, collection, treatment, recycling, and disposal of restricted solids, water, waste water, used motor oil,
spent antifreeze, waste fluids and hydrocarbons.
Since the closing of the Thermo Fluids Inc. (TFI) acquisition on
April 10, 2012, the Company has operated through two business segments: Shale Solutions (previously referred to as Fluids Management) and Industrial Solutions (previously referred to as Recycling).
Shale Solutions provides comprehensive environmental solutions for unconventional oil and gas exploration and production
including the delivery, collection, treatment, recycling, and disposal of restricted environmental products used in the development of unconventional oil and natural gas fields. Shale Solutions currently operates in select shale areas in the United
States including the predominately oil-rich shale areas consisting of the Utica, Eagle Ford, Tuscaloosa Marine, Mississippian Lime and Permian Shale basins and, since the completion of the merger with with Badlands Power Fuels, LLC on
November 30, 2012, the Bakken Shale basin, and the predominately gas-rich shale areas consisting of the Haynesville, Marcellus and Barnett Shale areas. Shale Solutions serves customers seeking fresh water acquisition, temporary water
transmission and storage, transportation, treatment, recycling or disposal of complex water flows, such as flowback and produced brine water, and management of other environmental products in connection with shale oil and gas hydraulic fracturing
drilling, or hydrofracturing, operations. In addition, Shale Solutions rents certain of its equipment to customers, including providing for delivery and pickup.
Industrial Solutions provides route-based environmental services and waste recycling solutions that focus on the collection and recycling of used motor oil (UMO) and is the largest seller of
reprocessed fuel oil (RFO) from recovered UMO in the Western United States.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the rules and
regulations of the SEC. In the opinion of management, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth herein. The accompanying unaudited
condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts, transactions and profits are eliminated in consolidation.
Our condensed consolidated balance sheet as of December 31, 2012, included herein, has been derived from the audited financial
statements included in our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on March 18, 2013 (our 2012 Annual Report on Form 10-K). Unless stated otherwise, any reference to income statement
items in these accompanying unaudited interim consolidated financial statements refers to results from continuing operations. In addition, certain information and disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America (U.S. GAAP) have been omitted from these financial statements and related notes pursuant to the rules and regulations of the SEC. Accordingly, these financial
statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, contained in our 2012 Annual Report on Form 10-K as well as other information we have filed with the SEC.
Use of Estimates
Our consolidated financial statements have been prepared in conformity with U.S. GAAP. The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to prior period amounts in the condensed consolidated statements of operations in order to
conform to the current years presentation.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU)
No. 2013-02,
Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income
(ASU 2013-02). The amendments in this update do not change the current requirements for reporting net income or other comprehensive
income in financial statements.
10
However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to
present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified
is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to
cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments in this update are effective prospectively for reporting periods beginning after December 15, 2012, which for the
Company is the reporting period starting January 1, 2013. The adoption of ASU 2013-02 did not have a material impact on the Companys consolidated financial statements. As permitted under ASU 2013-02, the Company will elect to present
reclassification adjustments from each component of accumulated other comprehensive income within a single note to the financial statements beginning in 2013 if and when reclassification adjustments are made. There were no reclassification
adjustments from any components of accumulated other comprehensive income during the quarters ended March 31, 2013 and 2012.
In July 2012, the FASB issued ASU No. 2012-02,
Testing Indefinite-Lived Intangible Assets for Impairment
(ASU 2012-02). The amendments in this update provide an entity the option
to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and
circumstances, an entity concludes that it is not more likely than not that the indefinite lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to
determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Accounting Standards Codification subtopic 350-30,
General
Intangibles other than Goodwill
. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be
able to resume performing the qualitative assessment in any subsequent period. The amendments in this update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, which for the
Company are the annual and interim periods starting January 1, 2013. As of December 31, 2012, the Company did not have any intangible assets with indefinite lives. At this time, the Company does not anticipate the adoption of ASU 2012-02
will have a material impact on the Companys consolidated financial statements.
In September 2011, the FASB issued ASU
No. 2011-08,
Testing Goodwill for Impairment
(ASU 2011-08). The amendments in this update provide an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to
a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair
value of the reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by
calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. The amendment does not change the requirement to perform the second step of the interim goodwill impairment test to measure
the amount of an impairment loss, if any, if the carrying amount of a reporting unit exceeds its fair value. Under the amendments in this update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and
proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments in this update were effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after December 15, 2011, which for the Company were the annual and interim periods starting January 1, 2012. As permitted under ASU 2011-08 the Company elected to bypass the qualitative
assessment at September 30, 2012, which was the date the Company performed its annual test, and instead proceeded directly to performing the first step of the two-step goodwill impairment test.
Basic earnings per share (EPS) excludes dilution and is computed by dividing income (loss) applicable to
common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is based upon the weighted average number of common shares outstanding during the period plus the additional weighted average common stock
equivalent shares during the period. Common stock equivalent shares result from shares issuable under call options as well as the assumed exercises of outstanding stock options and warrants, the proceeds of such exercises which are then assumed to
have been used to repurchase outstanding shares of common stock. Stock options and warrants are deemed to be anti-dilutive when the average market price of the common stock during the period is less than the exercise prices of the stock options and
warrants.
For the purpose of the computation of EPS, shares issued in connection with acquisitions that are contingently
returnable are classified as issued but are not included in the basic weighted average number of shares outstanding until all applicable conditions are satisfied such that the shares are no longer contingently returnable. As of March 31, 2013
and 2012, respectively, excluded from the computation of basic EPS are approximately 12.8 million and 1.1 million of shares issuable under call options and contingently returnable shares that are subject to sellers indemnification
obligations and were being held in escrow as of such respective dates.
11
The following table presents the calculation of basic and diluted net loss per common share
(in 000s except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March
31,
|
|
|
|
2013
|
|
|
2012
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(12,632
|
)
|
|
$
|
(3,863
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Total weighted average shares basic
|
|
|
238,407,925
|
|
|
|
125,159,136
|
|
Common stock equivalents (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average shares diluted
|
|
|
238,407,925
|
|
|
|
125,159,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Antidilutive stock-based awards and warrants excluded (b)
|
|
|
1,878,667
|
|
|
|
1,427,941
|
|
(a)
|
For the three months ended March 31, 2013 and 2012, no shares of common stock underlying stock options, restricted stock or other common stock equivalents were
included in the computation of diluted EPS because the inclusion of such shares would be antidilutive based on the net losses reported.
|
(b)
|
Warrants and stock options to purchase 1,878,667 shares and 1,427,941 shares of our common stock had exercise prices that exceeded the average market price of our
common stock for the three months ended March 31, 2013 and 2012, respectively, and are therefore excluded from the computation of diluted EPS.
|
Power Fuels Merger
On November 30, 2012, the Company and its wholly-owned subsidiary, Rough Rider Acquisition, LLC completed a merger (the Power Fuels Merger) with Badlands Power Fuels, LLC (collectively
with its subsidiaries, Power Fuels) of which the Companys Chief Executive Officer and Vice Chairman, Mark D. Johnsrud, was the sole member. Prior to the merger, Power Fuels was a privately-held North Dakota-based environmental
solutions company providing delivery and disposal of environmental products, fluids transportation and handling, water sales, and equipment rental services for unconventional oil and gas exploration and production businesses. As a result of the
Power Fuels Merger on November 30, 2012, Power Fuels and its subsidiaries became wholly-owned subsidiaries of the Company.
The Power Fuels Merger consideration consisted of the following:
|
|
|
95.0 million unregistered shares of the Companys common stock, with a fair value of approximately $371.5 million, of which 10.0 million
shares were placed into escrow for up to three years to pay certain potential indemnity claims; and
|
|
|
|
$129.4 million in cash including adjustment for targeted versus actual debt.
|
The Power Fuels Merger has been accounted for as a business combination under the acquisition method of accounting.
12
The aggregate purchase price at November 30, 2012 was approximately $500.9 million and the preliminary allocation of such amount, as updated through March 31, 2013, is summarized as
follows (in 000s):
|
|
|
|
|
Cash
|
|
$
|
2,111
|
|
Accounts receivable
|
|
|
57,405
|
|
Inventory
|
|
|
3,443
|
|
Other assets
|
|
|
2,355
|
|
Customer relationships
|
|
|
145,000
|
|
Property, plant and equipment
|
|
|
278,527
|
|
Goodwill
|
|
|
312,837
|
|
Accounts payable and accrued expenses
|
|
|
(24,027
|
)
|
Debt
|
|
|
(150,367
|
)
|
Deferred income tax liabilities, net
|
|
|
(126,429
|
)
|
|
|
|
|
|
Total
|
|
$
|
500,855
|
|
|
|
|
|
|
The purchase price allocation requires subjective estimates that, if incorrect, could be material to the
Companys consolidated financial statements including the amount of depreciation and amortization expense. The most important estimates for measurement of tangible fixed assets are (a) the cost to replace the asset with a new asset and
(b) the economic useful life of the asset after giving effect to its age, quality and condition. The most important estimates for measurement of intangible assets are (a) discount rates and (b) timing and amount of cash flows
including estimates regarding customer renewals and cancelations.
The goodwill recognized is attributable to the premium
associated with the immediate entry into the oil-rich Bakken Shale area where Power Fuels has an established workforce and operations.
TFI Acquisition
On April 10, 2012, the Company completed the
acquisition of all the issued and outstanding shares of TFI Holdings, Inc. and its wholly-owned subsidiary, Thermo Fluids Inc. (collectively, TFI), a route-based environmental services and waste recycling solutions provider that focuses
on the collection and recycling of UMO and the sale of RFO from recovered UMO.
The aggregate purchase price of $246.0 million
was comprised of approximately $230.2 million in cash, and 4,050,926 shares of the Companys common stock with a fair value of approximately $15.8 million, which shares were issued in a private placement and were held in escrow in respect of
potential indemnification obligations of the sellers of TFI. In connection with the settlement of these indemnification obligations, the aggregate purchase price increased $0.6 million during the three months ended March 31, 2013. The shares
remaining in escrow were sold at the direction of the sellers of TFI and the proceeds were distributed in April 2013.
The
acquisition of TFI has been accounted for as a business combination under the acquisition method of accounting. The allocation of the aggregate purchase price, which was revised in the three months ended March 31, 2013 to reflect the final
valuations, is summarized as follows (in 000s):
|
|
|
|
|
Accounts receivable
|
|
$
|
13,808
|
|
Inventory
|
|
|
3,456
|
|
Other assets
|
|
|
1,431
|
|
Customer relationships
|
|
|
93,200
|
|
Vendor relationships
|
|
|
16,300
|
|
Other intangibles
|
|
|
1,400
|
|
Property, plant and equipment
|
|
|
23,685
|
|
Goodwill
|
|
|
145,031
|
|
Accounts payable and accrued expenses
|
|
|
(13,045
|
)
|
Deferred income tax liabilities, net
|
|
|
(39,261
|
)
|
|
|
|
|
|
Total
|
|
$
|
246,005
|
|
|
|
|
|
|
13
The goodwill recognized is attributable to TFIs assembled workforce and premium
associated with the opportunity to further diversify the Companys operations and service offerings.
Other
Acquisitions
During the year ended December 31, 2012, the Company completed four other acquisitions, including three
in Shale Solutions (one in each of the first, second and third quarters of 2012) and one in Industrial Solutions in the second quarter of 2012. The aggregate purchase price of the acquired businesses was approximately $38.9 million consisting of
7,589,164 shares of the Companys common stock with an estimated fair value of approximately $30.5 million, cash consideration of approximately $2.6 million and approximately $5.8 million of contingent consideration. The results of operations
of the four acquisitions were not material to our consolidated results of operations.
In conjunction with an acquisition
completed in Shale Solutions in the third quarter of 2012, the Company acquired a 51% interest in Appalachian Water Services, LLC (AWS) and has a call option to buy the remaining 49% at a fixed price at a stated future date, and the
noncontrolling interest holder has a put option to sell the remaining 49% percent to the Company under those same terms. As such, the fixed price of the call option is equal to the fixed price of the put option. In accordance with ASC 480,
Distinguishing Liabilities from Equity
, the option contracts are viewed on a combined basis with the noncontrolling interest and accounted for as the Companys financing of the purchase of the noncontrolling interest.
Accordingly, $9.3 and $9.0 million, representing the present value of the option, was classified as other long-term obligations in the accompanying condensed consolidated balance sheet at March 31, 2013 and December 31, 2012, respectively,
with the financing accreted, as interest expense, to the strike price of the option over the period until settlement.
The
allocations of the combined aggregate purchase prices at the respective 2012 acquisition dates are summarized as follows (in 000s):
|
|
|
|
|
Accounts receivable
|
|
$
|
2,653
|
|
Equipment
|
|
|
21,546
|
|
Customer relationships
|
|
|
10,164
|
|
Goodwill
|
|
|
13,960
|
|
Other long-term obligations
|
|
|
(8,769
|
)
|
Other liabilities
|
|
|
(613
|
)
|
|
|
|
|
|
Total
|
|
$
|
38,941
|
|
|
|
|
|
|
Pro forma Financial Information Reflecting the Power Fuels Merger, TFI Acquisition and Other
Acquisitions
The following compares the actual results of operations for the three months ended March 31, 2013 to the
unaudited pro forma results of operations for the three months ended March 31, 2012, assuming for purposes of the unaudited pro forma results of operations for the three months ended March 31, 2012, that all of the acquisitions or mergers
that occurred during the year ended December 31, 2012, were completed on January 1, 2012 (in 000s):
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
(Actual)
2013
|
|
|
(Pro forma)
2012
|
|
Revenues
|
|
$
|
159,455
|
|
|
$
|
183,962
|
|
Net income (loss)
|
|
|
(12,632
|
)
|
|
|
5,957
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.05
|
)
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
(0.05
|
)
|
|
$
|
0.02
|
|
The pro forma results for the three months ended March 31, 2012, include adjustments to reflect
additional amortization of intangibles and depreciation of assets associated with the acquired and merged businesses and additional interest expense for debt issued to consummate these transactions. The pro forma financial information presented
above is not necessarily indicative of either the results of operations that would have occurred had the acquisitions been effective as of January 1, 2012 or of future operations of the Company.
(4)
|
Goodwill and Intangible Assets
|
Goodwill
The change in the carrying amount of goodwill during the three months ended March 31, 2013 is as follows (in 000s):
|
|
|
|
|
Balance at December 31, 2012
|
|
$
|
555,091
|
|
Additions acquisition adjustments
|
|
|
8,341
|
|
|
|
|
|
|
Balance at March 31, 2013
|
|
$
|
563,432
|
|
|
|
|
|
|
During the quarter ended March 31, 2013, the Company recorded adjustments to goodwill primarily
related to the finalization of the TFI asset valuations and to a lesser extent, other adjustments including working capital adjustments, the settlement of tax indemnification arrangements and the write-off of certain acquisition-related deferred tax
balances.
14
Intangible Assets
Intangible assets consist of the following (in 000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
|
|
Gross
carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
|
Remaining
useful
life
(a)
|
|
|
Gross
carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
|
Remaining
useful
life
(a)
|
|
Customer relationships
|
|
$
|
260,759
|
|
|
$
|
(22,789
|
)
|
|
$
|
237,970
|
|
|
|
12.0
|
|
|
$
|
268,859
|
|
|
$
|
(15,370
|
)
|
|
$
|
253,489
|
|
|
|
12.3
|
|
Disposal permits
|
|
|
2,788
|
|
|
|
(557
|
)
|
|
|
2,231
|
|
|
|
8.1
|
|
|
|
2,788
|
|
|
|
(472
|
)
|
|
|
2,316
|
|
|
|
8.3
|
|
Customer contracts
|
|
|
17,352
|
|
|
|
(3,331
|
)
|
|
|
14,021
|
|
|
|
13.8
|
|
|
|
17,352
|
|
|
|
(3,073
|
)
|
|
|
14,279
|
|
|
|
14.0
|
|
Vendor relationships
|
|
|
16,300
|
|
|
|
(3,260
|
)
|
|
|
13,040
|
|
|
|
4.8
|
|
|
|
16,300
|
|
|
|
(2,444
|
)
|
|
|
13,856
|
|
|
|
5.0
|
|
Other
|
|
|
1,195
|
|
|
|
(584
|
)
|
|
|
611
|
|
|
|
1.9
|
|
|
|
1,195
|
|
|
|
(437
|
)
|
|
|
758
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
298,394
|
|
|
$
|
(30,521
|
)
|
|
$
|
267,873
|
|
|
|
12.0
|
|
|
$
|
306,494
|
|
|
$
|
(21,796
|
)
|
|
$
|
284,698
|
|
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Remaining useful life is weighted average, calculated based on the net book value and the remaining amortization period of each respective intangible asset.
|
Amortization expense was $8.7 million and $1.3 million for the three months ended March 31, 2013 and 2012,
respectively.
(5)
|
Fair Value Measurements
|
Fair value represents an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. U.S.
GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
|
|
Level 1 Observable inputs such as quoted prices in active markets that are accessible at the measurement date for identical assets or
liabilities;
|
|
|
|
Level 2 Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2013 and
December 31, 2012 and the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value are as follows (in 000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Quoted Prices
in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
10,496
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,496
|
|
Obligation for AWS call/put option
|
|
|
9,273
|
|
|
|
|
|
|
|
|
|
|
|
9,273
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
10,831
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,831
|
|
Obligation for AWS call/put option
|
|
|
9,021
|
|
|
|
|
|
|
|
|
|
|
|
9,021
|
|
The fair value of the
contingent consideration was determined using a probability-weighted income approach at the acquisition date and is revalued at each reporting date or more frequently if circumstances dictate based on changes in the discount periods and rates,
changes in the timing and amount of the revenue estimates and changes in probability assumptions with respect to the likelihood of achieving the obligations. Contingent consideration is reported as current portion of contingent consideration and
long-term contingent consideration in the Companys condensed consolidated balance sheets. Changes to the fair value of contingent consideration are recorded as other income (expense), net in the Companys consolidated statements of
operations. Accretion expense related to the increase in the net present value of the contingent liabilities is included in interest expense for the period. The fair value measurement is based on significant inputs not observable in the market,
which are referred to as Level 3 inputs. The changes to contingent consideration during the three months ended March 31, 2013 are as follows (in 000s):
15
|
|
|
|
|
Balance at December 31, 2012
|
|
$
|
10,831
|
|
Additions
|
|
|
|
|
Accretion
|
|
|
65
|
|
Cash payments
|
|
|
(400
|
)
|
|
|
|
|
|
Balance at March 31, 2013
|
|
$
|
10,496
|
|
|
|
|
|
|
The fair value of the obligation for the AWS call/put option represents the present value of the
Companys right to acquire the remaining 49% interest in AWS from the noncontrolling interest holder at a fixed price of $11.0 million payable in shares of the Companys common stock. The noncontrolling interest holder has a put option to
sell the remaining 49% to the Company under the same terms. In accordance with ASC 480,
Distinguishing Liabilities from Equity
, the instrument is accounted for as a financing of the Companys purchase of the minority
interest. Accretion expense related to the increase in the net present value of the AWS call/put option is included in interest expense for the period.
In addition to the Companys assets and liabilities that are measured at fair value on a recurring basis, the Company is required, by U.S. GAAP, to measure certain assets and liabilities at fair
value on a nonrecurring basis after initial recognition. Generally, assets are measured at fair value on a nonrecurring basis as a result of impairment charges. Equity method investments are measured at fair value on a nonrecurring basis when deemed
necessary, using observable inputs such as trading prices of the stock as well as using discounted cash flows, incorporating adjusted available market discount rate information and the Companys estimates for liquidity risk.
Debt consists of the following (in 000s) at March 31, 2013 and December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity Date
|
|
March 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Unamortized
Deferred
Financing Costs
|
|
|
Debt
|
|
|
Debt
|
|
Revolving Credit Facility(a)
|
|
|
3.46
|
%
|
|
Nov. 2017
|
|
$
|
7,249
|
|
|
$
|
146,990
|
|
|
$
|
146,990
|
|
2018 Notes(b)
|
|
|
9.875
|
%
|
|
Apr. 2018
|
|
|
16,113
|
|
|
|
400,000
|
|
|
|
400,000
|
|
Vehicle financings(c)
|
|
|
3.30
|
%
|
|
Various
|
|
|
|
|
|
|
20,907
|
|
|
|
20,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
|
|
|
$
|
23,362
|
|
|
|
567,897
|
|
|
|
567,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance discount(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,231
|
)
|
|
|
(1,277
|
)
|
Issuance premium(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
357
|
|
|
|
366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt, net
|
|
|
|
|
|
|
|
|
|
|
|
|
567,023
|
|
|
|
566,126
|
|
Less: current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,050
|
)
|
|
|
(4,699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
$
|
561,973
|
|
|
$
|
561,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The interest rate presented represents the interest rate on the $325.0 million senior secured revolving credit facility (the Revolving Credit Facility) at
March 31, 2013.
|
(b)
|
The interest rate presented represents the coupon rate on the Companys outstanding $400 million aggregate principal amounts of 9.875% Senior Notes due 2012 (the
2018 Notes), excluding the effect of deferred financing costs and issue discounts and premiums. Including the effect of such items, the effective interest rate on the 2018 Notes is approximately 11.0%.
|
(c)
|
Vehicle financings consist of installment notes payable and capital lease arrangements with a weighted-average annual interest rate of approximately 3.30% and which
mature in varying installments between 2013 and 2017. Installment notes payable and capital lease obligations were $1.9 million and $19.0 million respectively, at March 31, 2013 and were $2.1 million and $17.9 million, respectively, at
December 31, 2012.
|
(d)
|
The issuance discount represents the unamortized difference between the $250.0 million aggregate principal amount of the 2018 Notes issued in April 2012 and the
proceeds received upon issuance (excluding interest and fees). The issuance premium represents the unamortized difference between the proceeds received in connection with the November 2012 issuance of the 2018 Notes (excluding interest and fees) and
the $150.0 million aggregate principal amount thereunder.
|
16
As of March 31, 2013 the estimated fair value of the Companys debt was as follows
(in 000s):
|
|
|
|
|
Revolving Credit Facility
|
|
$
|
146,990
|
|
2018 Notes
|
|
|
426,400
|
|
Capitalized lease obligations
|
|
|
20,907
|
|
|
|
|
|
|
Total
|
|
$
|
594,297
|
|
|
|
|
|
|
The estimated fair value of the Companys 2018 Notes is based on quoted market prices. The
Companys Revolving Credit Facility and vehicle financing obligations bear interest at rates commensurate with market rates and therefore their respective carrying values approximate fair value.
The following table shows the components of the income tax expense (benefit) (in 000s):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March
31,
|
|
|
|
2013
|
|
|
2012
|
|
Current income tax expense (benefit)
|
|
$
|
(705
|
)
|
|
$
|
177
|
|
Deferred income tax expense (benefit)
|
|
|
(4,960
|
)
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
(5,665
|
)
|
|
$
|
420
|
|
|
|
|
|
|
|
|
|
|
The effective income tax rate for the three months ended March 31, 2013 was 31.0%, which differs
from the federal statutory rate of 35.0% primarily due to the tax impact of state taxes and nondeductible items such as stock based compensation and transaction costs offset by $1.6 million of out-of-period adjustments to deferred taxes associated
with certain acquired intangible assets. The effective income tax rate for the three months ended March 31, 2012 was negative 12.2%, which differs from the federal statutory rate of 35.0% primarily due to the tax impact of state taxes and
changes in valuation allowance.
(8)
|
Share-based Compensation
|
We may grant stock options, stock appreciation rights, restricted common stock and restricted stock units, performance
shares and units, other stock-based awards and cash-based awards to our employees, directors, consultants and advisors pursuant to the Heckmann Corporation 2009 Equity Incentive Plan (the 2009 Plan). On May 8, 2012, our stockholders
approved an amendment to the 2009 Plan that increased the number of shares of common stock issuable under the 2009 Plan by 5,000,000 shares to an aggregate total of 10,000,000 shares. The additional shares were registered pursuant to a Registration
Statement on Form S-8 (File No. 333-182068) filed with the SEC on June 12, 2012.
Stock Options
The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. During the three months ended
March 31, 2013 and 2012 the Company granted 137,000 and 20,000 stock options, respectively, pursuant to the 2009 Plan. Stock-based compensation cost is included in general and administrative expense in the accompanying condensed consolidated
statements of operations and totaled approximately $384,000 and $394,000 for the three months ended March 31, 2013 and 2012, respectively.
Restricted Stock
The
Company measures the cost of employee and board of director services received in exchange for awards of restricted stock, based on the market value of the Companys common shares at the date of grant. During the three months ended
March 31, 2013, the Company granted 10,000 shares of restricted stock. No grants of restricted stock were made during the three months ended March 31, 2012. During the three months ended March 31, 2013 the Company released 51,666
shares of stock to certain employees upon the lapse of restrictions. Stock-based compensation expense for grants of restricted stock was $406,000 and $322,000 for the three months ended March 31, 2013 and 2012, respectively, which amounts are
included in general and administrative expense in the accompanying condensed consolidated statements of operations.
(9)
|
Commitments and Contingencies
|
Environmental Liabilities
The Company is subject to the environmental protection laws and regulatory framework of the United States and the individual states where it operates water gathering pipelines and salt water disposal
wells. The Company has installed safety, monitoring and environmental protection equipment such as pressure sensors and relief valves, and has established reporting and responsibility protocols for environmental protection and reporting to relevant
local environmental protection departments. Management believes the Company is in material compliance with all applicable environmental protection laws and regulations in the United States and the states in which the Company operates. The unaudited
condensed consolidated balance sheet at March 31, 2013 included accruals totaling $1.7 million for various environmental matters, including the estimated cost to comply with a Louisiana Department of Environmental Quality requirement that the
Company test and monitor the soil at certain locations to confirm that prior spills were successfully remediated. The Company believes that there are no unrecorded liabilities in connection with the Companys compliance with environment laws
and regulations.
17
Litigation
We are party to various litigation matters, including regulatory and administrative proceedings arising out of the normal course of business, the more significant of which are summarized below. The
ultimate outcome of each of these matters cannot presently be determined, nor can the liability that could potentially result from a negative outcome be reasonably estimated presently for every case. The liability we may ultimately incur with
respect to any one of these matters in the event of a negative outcome may be in excess of amounts currently accrued with respect to such matters and, as a result of these matters, may potentially be material to our financial position or results of
operations. We review our litigation activities and determine if an unfavorable outcome to us is considered remote, reasonably possible or probable as defined by U.S. GAAP. Where we have determined an unfavorable
outcome is probable and is reasonably estimable, we have accrued for potential litigation losses. In addition to the matters described below, we are involved in various other claims and legal actions, including regulatory and administrative
proceedings arising out of the normal course of our business. We do not expect that the outcome of such other claims and legal actions will have a material adverse effect on our financial position or results of operations.
Class Action.
On May 21, 2010, Richard P. Gielata, an individual purporting to act on behalf of stockholders, served a class
action lawsuit filed May 6, 2010 against the Company and various directors and officers in the United States District Court for the District of Delaware captioned
In re Heckmann Corporation Securities Class Action
(Case
No. 1:10-cv-00378-JJF-MPT) (the Class Action). On October 8, 2010, the court-appointed lead plaintiff filed an Amended Class Action Complaint which adds China Water as a defendant. The Class Action alleges violations of
federal securities laws in connection with the acquisition of China Water. The Company responded by filing a motion to transfer the Class Action to California and a motion to dismiss the case. On March 31, 2011, the District Court adopted the
Magistrate Judges report and recommendation to deny the motion to transfer. On May 25, 2012, the court entered a memorandum order adopting the Magistrate Judges report and recommendation denying the Companys motion to
dismiss. On June 25, 2012, the court entered a scheduling order setting forth a schedule for, among other things, discovery and dispositive motions, and document discovery commenced. On July 9, 2012, the Company filed its Answer to the
Amended Class Action Complaint. On September 19, 2012, the Company filed a Motion for Partial Summary Judgment and a Motion for Proposed Briefing Schedule. The Magistrate Judge denied the Motion for Proposed Briefing Schedule on October 4,
2012 and the Company filed objections to the Magistrate Judges ruling. On January 16, 2013, the Court adopted the Magistrate Judges ruling and denied the Companys request for a briefing schedule on its Motion for Partial
Summary Judgment. On October 19, 2012, plaintiff filed a motion to certify a class and appoint class representatives and class counsel. On January 18, 2013, the Company filed its opposition and a motion to exclude the declaration of
plaintiffs class certification expert. On February 19, 2013, plaintiff filed a reply brief. A hearing on plaintiffs motion to certify a class and appoint class representatives and class counsel has not been scheduled. The Company
intends to vigorously defend this case. The Company has not recorded any liabilities for the Class Action matter other than with respect to certain costs of counsel on the basis that any such liabilities are currently neither probable nor estimable.
Derivative Action.
On November 18, 2010, Melissa Hess filed a stockholder derivative complaint, purportedly on
behalf of the Company, against various officers and directors in the Superior Court of California, County of Riverside captioned
Hess v. Heckmann,et al.
(Case No. INC10010407) (the Derivative Action). The Derivative Action alleges
claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment in connection with the acquisition of China Water. The Company responded to the Derivative Action on February 1, 2011 by filing a motion to stay the case
until the Class Action is resolved and a demurrer seeking to dismiss the case. The Company filed a reply to plaintiffs opposition to the motion to stay and demurrer on May 25, 2011. The court held a hearing on the demurrer and motion to
stay on June 21, 2011. On July 20, 2011, the court issued orders overruling the Companys demurrer and denying its motion to stay the Derivative Action. On August 24, 2011, the Companys board of directors formed a special
litigation committee and delegated to the special litigation committee the Boards full power and authority to investigate the Derivative Action to determine whether it is in the best interests of the Company to allow the Derivative Action to
proceed on behalf of the Company. On September 2, 2011, the Company filed a motion to stay the Derivative Action pending completion of the special litigation committees investigation and determination. On September 26, 2011, the
Court held a hearing on the Companys motion to stay. On October 3, 2011, the court issued an order denying the Companys motion to stay without prejudice and a separate order requiring Defendants to respond to plaintiffs
request for production of documents within thirty days. On October 28, 2011, the special litigation committee filed a motion to stay the Derivative Action pending completion of its investigation and determination. After meeting and conferring
on discovery matters, on December 2, 2011, the special litigation committee, plaintiff and defendants entered into a stipulation and proposed order to vacate the motion to stay filed by the special litigation committee, and, on December 5,
2011, the Court entered the order. On September 14, 2012, the company filed a Motion to Dismiss or, in the alternative, a Motion for Summary Judgment (Motion to Terminate) based on the special litigation committees
determination that it was not in the best interests of the Company and its current shareholders to pursue the claims pled in the derivative complaint and the special litigation committees decision to move to terminate the Derivative Action.
During the pendency of the Motion to Terminate, the parties began settlement discussions and a stipulation of settlement was signed on April 1, 2013. The stipulation of settlement requires preliminary and final approval by the Superior
Court of California. On April 24, 2013, the Superior Court granted preliminary approval of the settlement and a hearing on final approval is set for June 24, 2013. Under the stipulation of settlement the Company agreed to make certain
corporate governance changes, pay the plaintiffs attorneys $300,000, which will be paid by the Companys insurance carriers
18
and issue 558,660 shares of the Companys common stock to the plaintiffs attorneys. Subject to Court approval and confirmation, the proposed corporate governance changes include
formally appointing a lead independent director, adopting a clawback policy to evaluate the recoupment of bonuses or incentive compensation in certain instances, implementing stock ownership guidelines for executives and directors and amending its
insider trading policies. In connection with the preliminary settlement, the Company recognized a charge of $2.4 million at March 31, 2013, which represents the product of the Companys closing share price on March 29, 2013 of $4.29
per share and the 558,660 shares offered. The charge is classified as a component of general and administrative expenses in the condensed consolidated statement of operations for the three months ended March 31, 2013 and the offsetting
liability is classified as a component of accrued expenses in the Companys condensed consolidated balance sheet at March 31, 2013. The liability associated with the derivative lawsuit will be adjusted each reporting period going forward
for changes in the market price of the Companys common stock until final approval of the preliminary settlement is granted by the Superior Court of California. The Companys position is that all or a portion of the $2.4 million settlement
accrual is reimbursable by the Companys insurers; however, the Company has not recorded a receivable as of March 31, 2013 due to the existence of certain contingencies surrounding the collectibility of the amount that have not yet been
resolved.
Contingent Consideration for Acquisitions
Appalachian Water Services, LLC Acquisition
The seller of the membership interests in AWS is entitled to receive additional consideration equal to $1.5 million, payable entirely in shares of
the Companys common stock, in the event that EBITDA, as defined in the membership interest purchase agreement for any consecutive twelve months from September 1, 2012 to and ending on August 31, 2014, is equal to or greater $4.0
million.
All Phase Acquisition
The Company was required to make additional payments to the former shareholders
of JB Transportation Services, Inc. (All Phase), which the Company acquired on June 15, 2012, based upon the achievement of certain volume targets over the remainder of 2012. The Company settled this obligation during the first
quarter 2013 in exchange for a $0.4 million payment to the former shareholders.
Keystone Vacuum, Inc. Acquisition
In addition to the initial purchase price, the Company may make additional payments to the sellers of Keystone Vacuum, Inc. and related entities (Collectively, Keystone), which the Company acquired on February 3, 2012, for
each of fiscal years ended December 31, 2012 through 2015, in which Keystones adjusted EBITDA (as defined in and calculated in accordance with the asset purchase agreement related to the Keystone acquisition) related to the construction
portion of the acquired businesses is greater than applicable adjusted EBITDA targets. Any additional amount payable would be payable in shares of the Companys common stock. Any such additional payments are capped at an aggregate value of $7.5
million.
Complete Vacuum and Rentals, Inc. Acquisition
In addition to the initial purchase price, the Company
may make additional payments to the former shareholders of Complete Vacuum and Rentals, Inc. (CVR), which the Company acquired on November 30, 2010. For each of the years ended December 31, 2011 through 2013, in which CVR
achieves targeted adjusted EBITDA (as defined in and calculated in accordance with the stock purchase agreement related to the CVR acquisition) of $20.0 million, we could be required to pay CVRs former shareholders an additional $2.0 million
plus one-half of the amount by which adjusted EBITDA exceeds $20.0 million for the relevant year up to an aggregate maximum payment of $12.0 million (the Earn-Out Payments). The Earn-Out Payments are payable in a combination of 70% cash
and 30% in shares of the Companys common stock (based on the trading price of the Companys common stock at the time any such payment is made). On September 12, 2012, the Company entered into a settlement agreement with the former
owners of CVR whereby, among other settled items relating to pre- and post-closing indemnification obligations of the parties and including dismissal of a lawsuit, the Company delivered to the former owners 1,726,619 shares of the Companys
common stock representing $6.0 million in value at the time of the issuance as an Earn-Out Payment for the fiscal year ended December 31, 2011. Accordingly, the balance of the remaining Earn-Out Payments for the fiscal years ending
December 31, 2012 and 2013, respectively, and in the aggregate cannot exceed $6.0 million which, pursuant to the terms of the settlement agreement, will be paid, if at all, in shares of the Companys common stock.
The carrying values of the Companys above described contingent consideration obligations were $10.5 million and $10.8 million at
March 31, 2013 and December 31, 2012, respectively.
Since the TFI acquisition on April 10, 2012, the Company has had two reportable segments: (a) Shale Solutions
(which includes Power Fuels and which was previously referred to as Fluids Management); and (b) Industrial Solutions (which includes TFI and which was previously referred to as Recycling). The Companys reportable segments at
March 31, 2013 represent those used by the Companys chief operating decision maker to evaluate performance and allocate resources and are consistent with its reportable segments at December 31, 2012. Refer to Note 1 for information
on the types of services from which each segment derives its revenues. The condensed consolidated financial information and the Industrial Solutions segment financial information include the results of operations for TFI from April 10, 2012.
As, prior to the TFI acquisition, the Company had only one reportable segment (what is now referred to as Shale Solutions), no historical comparative information is provided for Industrial Solutions as of and for the three months March 31,
2012. The Company evaluates business segment performance based on income (loss) before income taxes exclusive of corporate general and administrative costs and interest expense, which are not allocated to the segments.
19
The financial information for the Companys reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
Solutions
|
|
|
Shale
Solutions
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(in millions)
|
|
Three months ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
28.8
|
|
|
$
|
130.6
|
|
|
$
|
|
|
|
$
|
159.4
|
|
Depreciation and amortization of intangible assets
|
|
|
3.4
|
|
|
|
27.8
|
|
|
|
0.2
|
|
|
|
31.4
|
|
Income (loss) before income taxes
|
|
|
(0.4
|
)
|
|
|
2.4
|
|
|
|
(20.3
|
)
|
|
|
(18.3
|
)
|
Additions to fixed assets
|
|
|
0.9
|
|
|
|
16.6
|
|
|
|
0.0
|
|
|
|
17.5
|
|
Goodwill
|
|
|
146.5
|
|
|
|
416.9
|
|
|
|
|
|
|
|
563.4
|
|
Total assets (a)
|
|
|
294.1
|
|
|
|
1,294.0
|
|
|
|
49.2
|
|
|
|
1,637.3
|
|
|
|
|
|
|
Three months ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
54.9
|
|
|
$
|
|
|
|
$
|
54.9
|
|
Depreciation and amortization of intangible assets
|
|
|
|
|
|
|
9.2
|
|
|
|
|
|
|
|
9.2
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
0.5
|
|
|
|
(3.9
|
)
|
|
|
(3.4
|
)
|
Additions to fixed assets
|
|
|
|
|
|
|
24.8
|
|
|
|
|
|
|
|
24.8
|
|
Goodwill
|
|
|
|
|
|
|
90.7
|
|
|
|
|
|
|
|
90.7
|
|
Total assets (a)
|
|
|
|
|
|
|
485.8
|
|
|
|
143.5
|
|
|
|
629.3
|
|
(a)
|
Total assets exclude intercompany receivables eliminated in consolidation.
|
Revenues from one customer of the Industrial Solutions segment represented approximately 51% of the segments total revenue for the three months ended March 31, 2013.
Revenues from four customers of the Shale Solutions segment each exceeded 10% of the segments total revenue and collectively
represented approximately 48% of the segments total revenue for the three months ended March 31, 2013.
(11)
|
Subsidiary Guarantors
|
The obligations of Heckmann Corporation under the 2018 Notes are jointly and severally, fully and unconditionally
guaranteed by certain of the Companys subsidiaries. The following tables present condensed consolidating financial information for Heckmann Corporation (the Parent Issuer), certain 100% wholly-owned subsidiaries (the
Wholly-Owned Subsidiary Guarantors) and Appalachian Water Services, LLC, a 51% owned subsidiary (the Non Wholly-Owned Subsidiary Guarantor), as of March 31, 2013 and December 31, 2012 and for the three months ended
March 31, 2013 and condensed consolidating financial information for the Parent Issuer and the Wholly-Owned Subsidiary Guarantors for the three months ended March 31, 2012.
20
Heckmann Corporation and Subsidiaries
Condensed Consolidating Balance Sheet
As of March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Heckmann
Corp.
(Parent)
|
|
|
Subsidiary
Guarantors
|
|
|
AWS
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,118
|
|
|
$
|
14,801
|
|
|
$
|
1,257
|
|
|
$
|
|
|
|
$
|
18,176
|
|
Restricted Cash
|
|
|
|
|
|
|
4,699
|
|
|
|
|
|
|
|
|
|
|
|
4,699
|
|
Accounts Receivable net
|
|
|
|
|
|
|
124,180
|
|
|
|
404
|
|
|
|
|
|
|
|
124,584
|
|
Other current assets
|
|
|
472,176
|
|
|
|
44,278
|
|
|
|
28
|
|
|
|
(488,165
|
)
|
|
|
28,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
474,294
|
|
|
|
187,958
|
|
|
|
1,689
|
|
|
|
(488,165
|
)
|
|
|
175,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
55
|
|
|
|
588,297
|
|
|
|
9,176
|
|
|
|
|
|
|
|
597,528
|
|
Equity Investments
|
|
|
931,153
|
|
|
|
8,237
|
|
|
|
|
|
|
|
(931,153
|
)
|
|
|
8,237
|
|
Intangible assets, net
|
|
|
|
|
|
|
266,461
|
|
|
|
1,412
|
|
|
|
|
|
|
|
267,873
|
|
Goodwill
|
|
|
|
|
|
|
552,988
|
|
|
|
10,444
|
|
|
|
|
|
|
|
563,432
|
|
Other
|
|
|
23,362
|
|
|
|
1,097
|
|
|
|
|
|
|
|
|
|
|
|
24,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,428,864
|
|
|
$
|
1,605,038
|
|
|
$
|
22,721
|
|
|
$
|
(1,419,318
|
)
|
|
$
|
1,637,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
876
|
|
|
$
|
29,312
|
|
|
$
|
110
|
|
|
$
|
|
|
|
$
|
30,298
|
|
Accrued Expenses
|
|
|
45,981
|
|
|
|
503,011
|
|
|
|
94
|
|
|
|
(488,165
|
)
|
|
|
60,921
|
|
Current portion of contigent consideration
|
|
|
|
|
|
|
97
|
|
|
|
1,500
|
|
|
|
|
|
|
|
1,597
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
5,050
|
|
|
|
|
|
|
|
|
|
|
|
5,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
46,857
|
|
|
|
537,470
|
|
|
|
1,704
|
|
|
|
(488,165
|
)
|
|
|
97,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
121,483
|
|
|
|
|
|
|
|
|
|
|
|
121,483
|
|
Long-term debt, less current portion
|
|
|
546,116
|
|
|
|
15,857
|
|
|
|
|
|
|
|
|
|
|
|
561,973
|
|
Long-term contingent consideration
|
|
|
|
|
|
|
8,899
|
|
|
|
|
|
|
|
|
|
|
|
8,899
|
|
Other long-term liabilities
|
|
|
|
|
|
|
1,920
|
|
|
|
9,273
|
|
|
|
|
|
|
|
11,193
|
|
Total shareholders equity
|
|
|
835,891
|
|
|
|
919,409
|
|
|
|
11,744
|
|
|
|
(931,153
|
)
|
|
|
835,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
1,428,864
|
|
|
$
|
1,605,038
|
|
|
$
|
22,721
|
|
|
$
|
(1,419,318
|
)
|
|
$
|
1,637,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Heckmann Corporation and Subsidiaries
Condensed Consolidating Balance Sheet
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Heckmann
Corp. (Parent)
|
|
|
Subsidiary
Guarantors
|
|
|
AWS
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,819
|
|
|
$
|
9,536
|
|
|
$
|
856
|
|
|
$
|
|
|
|
$
|
16,211
|
|
Restricted Cash
|
|
|
|
|
|
|
3,536
|
|
|
|
|
|
|
|
|
|
|
|
3,536
|
|
Accounts Receivable net
|
|
|
|
|
|
|
116,768
|
|
|
|
760
|
|
|
|
|
|
|
|
117,528
|
|
Other current assets
|
|
|
439,842
|
|
|
|
42,785
|
|
|
|
2
|
|
|
|
(454,013
|
)
|
|
|
28,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
445,661
|
|
|
|
172,625
|
|
|
|
1,618
|
|
|
|
(454,013
|
)
|
|
|
165,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
44
|
|
|
|
595,293
|
|
|
|
9,533
|
|
|
|
|
|
|
|
604,870
|
|
Equity Investments
|
|
|
957,976
|
|
|
|
8,279
|
|
|
|
|
|
|
|
(957,976
|
)
|
|
|
8,279
|
|
Intangible assets, net
|
|
|
|
|
|
|
283,248
|
|
|
|
1,450
|
|
|
|
|
|
|
|
284,698
|
|
Goodwill
|
|
|
|
|
|
|
544,647
|
|
|
|
10,444
|
|
|
|
|
|
|
|
555,091
|
|
Other
|
|
|
24,408
|
|
|
|
1,102
|
|
|
|
|
|
|
|
|
|
|
|
25,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,428,089
|
|
|
$
|
1,605,194
|
|
|
$
|
23,045
|
|
|
$
|
(1,411,989
|
)
|
|
$
|
1,644,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
757
|
|
|
$
|
28,566
|
|
|
$
|
215
|
|
|
$
|
|
|
|
$
|
29,538
|
|
Accrued Expenses
|
|
|
33,492
|
|
|
|
470,724
|
|
|
|
62
|
|
|
|
(454,013
|
)
|
|
|
50,265
|
|
Current portion of contigent consideration
|
|
|
|
|
|
|
1,968
|
|
|
|
|
|
|
|
|
|
|
|
1,968
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
4,699
|
|
|
|
|
|
|
|
|
|
|
|
4,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
34,249
|
|
|
|
505,957
|
|
|
|
277
|
|
|
|
(454,013
|
)
|
|
|
86,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
128,992
|
|
|
|
|
|
|
|
|
|
|
|
128,992
|
|
Long-term debt, less current portion
|
|
|
546,079
|
|
|
|
15,348
|
|
|
|
|
|
|
|
|
|
|
|
561,427
|
|
Long-term contingent consideration
|
|
|
|
|
|
|
7,363
|
|
|
|
1,500
|
|
|
|
|
|
|
|
8,863
|
|
Other long-term liabilities
|
|
|
|
|
|
|
1,805
|
|
|
|
9,021
|
|
|
|
|
|
|
|
10,826
|
|
Total shareholders equity
|
|
|
847,761
|
|
|
|
945,729
|
|
|
|
12,247
|
|
|
|
(957,976
|
)
|
|
|
847,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
1,428,089
|
|
|
$
|
1,605,194
|
|
|
$
|
23,045
|
|
|
$
|
(1,411,989
|
)
|
|
$
|
1,644,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Heckmann Corporation and Subsidiaries
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Heckmann
Corp.
(Parent)
|
|
|
Subsidiary
Guarantors
|
|
|
AWS
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
158,937
|
|
|
$
|
518
|
|
|
$
|
|
|
|
$
|
159,455
|
|
Cost of goods sold
|
|
|
|
|
|
|
(137,177
|
)
|
|
|
(725
|
)
|
|
|
|
|
|
|
(137,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
21,760
|
|
|
|
(207
|
)
|
|
|
|
|
|
|
21,553
|
|
Selling, general and administrative expenses
|
|
|
6,455
|
|
|
|
18,902
|
|
|
|
43
|
|
|
|
|
|
|
|
25,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(6,455
|
)
|
|
|
2,858
|
|
|
|
(250
|
)
|
|
|
|
|
|
|
(3,847
|
)
|
Interest expense, net
|
|
|
(12,900
|
)
|
|
|
(263
|
)
|
|
|
(252
|
)
|
|
|
|
|
|
|
(13,415
|
)
|
Loss from equity investment
|
|
|
2,045
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
(2,045
|
)
|
|
|
(42
|
)
|
Other expense, net
|
|
|
(983
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(993
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes before income taxes
|
|
|
(18,293
|
)
|
|
|
2,543
|
|
|
|
(502
|
)
|
|
|
(2,045
|
)
|
|
|
(18,297
|
)
|
Income tax benefit
|
|
|
5,661
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
5,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to common stockholders
|
|
$
|
(12,632
|
)
|
|
$
|
2,547
|
|
|
$
|
(502
|
)
|
|
$
|
(2,045
|
)
|
|
$
|
(12,632
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Heckmann Corporation and Subsidiaries
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Heckmann
Corp. (Parent)
|
|
|
Subsidiary
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
54,959
|
|
|
$
|
|
|
|
$
|
54,959
|
|
Cost of goods sold
|
|
|
|
|
|
|
(47,973
|
)
|
|
|
|
|
|
|
(47,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
6,986
|
|
|
|
|
|
|
|
6,986
|
|
Selling, general and administrative expenses
|
|
|
1,936
|
|
|
|
6,318
|
|
|
|
|
|
|
|
8,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,936
|
)
|
|
|
668
|
|
|
|
|
|
|
|
(1,268
|
)
|
Interest expense, net
|
|
|
(1,992
|
)
|
|
|
(154
|
)
|
|
|
|
|
|
|
(2,146
|
)
|
Income from equity investment
|
|
|
466
|
|
|
|
|
|
|
|
(466
|
)
|
|
|
|
|
Other Income (loss)
|
|
|
(30
|
)
|
|
|
1
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes before income taxes
|
|
|
(3,492
|
)
|
|
|
515
|
|
|
|
(466
|
)
|
|
|
(3,443
|
)
|
Income tax benefit (expense)
|
|
|
(371
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
(420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to common stockholders
|
|
$
|
(3,863
|
)
|
|
$
|
466
|
|
|
$
|
(466
|
)
|
|
$
|
(3,863
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Heckmann Corporation and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Heckmann
Corp.
(Parent)
|
|
|
Subsidiary
Guarantors
|
|
|
AWS
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(12,632
|
)
|
|
$
|
2,547
|
|
|
$
|
(502
|
)
|
|
$
|
(2,045
|
)
|
|
$
|
(12,632
|
)
|
Depreciation and amortization
|
|
|
195
|
|
|
|
30,858
|
|
|
|
394
|
|
|
|
|
|
|
|
31,447
|
|
Other adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
|
|
|
(2,897
|
)
|
|
|
640
|
|
|
|
252
|
|
|
|
|
|
|
|
(2,005
|
)
|
Changes in operating assets and liabilities, net of acquisitions and purchase price adjustments
|
|
|
11,833
|
|
|
|
(12,386
|
)
|
|
|
257
|
|
|
|
2,045
|
|
|
|
1,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(3,501
|
)
|
|
|
21,659
|
|
|
|
401
|
|
|
|
|
|
|
|
18,559
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
Purchase of property, plant and equipment
|
|
|
(16
|
)
|
|
|
(14,798
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,814
|
)
|
Proceeds from the sale of property and equipment
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(16
|
)
|
|
|
(14,757
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,773
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on notes payable and capital leases
|
|
|
|
|
|
|
(1,229
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,229
|
)
|
Other
|
|
|
(184
|
)
|
|
|
(408
|
)
|
|
|
|
|
|
|
|
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities from
|
|
|
(184
|
)
|
|
|
(1,637
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,821
|
)
|
Net (decrease) increase in cash
|
|
|
(3,701
|
)
|
|
|
5,265
|
|
|
|
401
|
|
|
|
|
|
|
|
1,965
|
|
Cash and cash equivalents beginning of period
|
|
|
5,819
|
|
|
|
9,536
|
|
|
|
856
|
|
|
|
|
|
|
|
16,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
2,118
|
|
|
$
|
14,801
|
|
|
$
|
1,257
|
|
|
$
|
|
|
|
$
|
18,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Heckmann Corporation and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Heckmann
Corp. (Parent)
|
|
|
Subsidiary
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(3,863
|
)
|
|
$
|
466
|
|
|
$
|
(466
|
)
|
|
$
|
(3,863
|
)
|
Depreciation and amortization
|
|
|
1
|
|
|
|
9,246
|
|
|
|
|
|
|
|
9,247
|
|
Other adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
|
|
|
1,167
|
|
|
|
371
|
|
|
|
|
|
|
|
1,538
|
|
Changes in operating assets and liabilities, net of acquisitions and purchase price adjustments
|
|
|
(21,744
|
)
|
|
|
8,372
|
|
|
|
466
|
|
|
|
(12,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities from continuing operations
|
|
|
(24,439
|
)
|
|
|
18,455
|
|
|
|
|
|
|
|
(5,984
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
|
(406
|
)
|
|
|
|
|
|
|
|
|
|
|
(406
|
)
|
Purchase of property, plant and equipment
|
|
|
|
|
|
|
(17,472
|
)
|
|
|
|
|
|
|
(17,472
|
)
|
Proceeds from available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of property and equipment
|
|
|
|
|
|
|
1,823
|
|
|
|
|
|
|
|
1,823
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities from continuing operations
|
|
|
(406
|
)
|
|
|
(15,649
|
)
|
|
|
|
|
|
|
(16,055
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from equity offering
|
|
|
76,048
|
|
|
|
|
|
|
|
|
|
|
|
76,048
|
|
Payments on long-term debt
|
|
|
(3,124
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,124
|
)
|
Payments on notes payable and capital leases
|
|
|
|
|
|
|
(1,198
|
)
|
|
|
|
|
|
|
(1,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities from continuing operations
|
|
|
72,924
|
|
|
|
(1,198
|
)
|
|
|
|
|
|
|
71,726
|
|
Net (decrease) increase in cash
|
|
|
48,079
|
|
|
|
1,608
|
|
|
|
|
|
|
|
49,687
|
|
Cash and cash equivalents beginning of period
|
|
|
79,528
|
|
|
|
666
|
|
|
|
|
|
|
|
80,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
127,607
|
|
|
$
|
2,274
|
|
|
$
|
|
|
|
$
|
129,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
On April 15, 2013, the Company acquired the assets and assembled workforce of a business that provides
transportation services in the South Marcellus Shale area. The acquisition includes a fleet of trucks and the assembled workforce consists of customer-qualified and experienced commercial drivers. Total consideration was $1.7 million including
328,196 shares of common stock valued at $1.3 million and cash of $0.4 million. The shares of common stock issued as consideration were taken from an acquisition shelf that was registered with the SEC on Form S-4.