Heckmann Corporation Reports Third Quarter 2009 Financial Results

November 9, 2009 4:01 PM EST

Final Series of Fundamental Changes Made to China Water Operations;

Heckmann Water Resources Corporation ("HWR") Commenced Profitable Operations;

Continued Improvement of Capital Structure and Resources

PALM DESERT, Calif.--(BUSINESS WIRE)-- Heckmann Corporation of Palm Desert, California (NYSE: HEK, HEK.U, HEK.WS) today announced financial results for the third quarter ended September 30, 2009. The results for the third quarter reflect the operating results of the combined company, which is Heckmann Corporation and its subsidiaries, including China Water and Drinks, Inc. and its affiliated entities ("China Water"), acquired October 30, 2008, and Heckmann Water Resources Corporation ("HWR") which was acquired on July 1, 2009.

Business Highlights

Final Series of Fundamental Changes Made to China Water Operations

    --  Renovation and installation of facility in Xi'an, Shaanxi Province is
        nearly completed and bottling operations for Coca-Cola will commence
        during the current quarter. The facility has long-term contracts in
        place for 80% of the current volume with additional expansion of the
        facility planned.
    --  Began the process of closing one facility and divesting another to
        improve the Company's total regional capacity and utilization profile.
        Usable equipment will be moved to other facilities to expand capacity to
        meet demand. Currently the Company believes that the remaining eight
        plants are in the right markets to serve its customer base and, that as
        a result of the changes, production capacity will be expanded by 13%
        during 2010. The restructure and deconsolidation charge was taken in
        during the third quarter.
    --  Began design and formulation of an innovative enhanced water product to
        be introduced at the Shanghai World Exposition in the summer of 2010.
        The beverage is to be manufactured and sold under a China Water and
        Drinks label by the Company as its first differentiated product produced
        by its first facility in the Shanghai area. The Company is also in
        discussions with customers regarding two additional plant locations for
        2010.
    --  Final series of impairments and extraordinary expenses recorded to
        accurately reflect current financial position and to ensure that going
        forward the Company's reported results will accurately reflect its
        operations.

Heckmann Water Resources Corporation ("HWR") Commenced Profitable Operations

    --  Construction of the new 40-mile pipeline and interconnecting lines into
        the Haynesville Shale in East Texas and North West Louisiana is on
        budget and on schedule for completion by early 2010 with revenues from
        the pipeline beginning this year.
    --  Over $60.0 million in firm multi-year disposal contracts already in
        place for approximately 38% of the pipeline capacity.
    --  Further investments will be made to acquire, permit, and operate
        additional disposal wells plus interconnecting pipeline into an
        integrated closed loop system capable of receiving and disposing up to
        120,000 barrels of daily capacity, a projected 20% increase in capacity.

Continued Improvement of Capital Structure and Resources

    --  During August 2009, the Board of Directors approved a one-year extension
        of the Company's discretionary equity buy-back plan through 2010 and an
        expansion of the plan to include common stock. No warrants or common
        shares were purchased in the three months ended September 30, 2009.
    --  The Company continued the share cancellation and recovery plan for 15.5
        million common shares and 1.5 million underlying warrants that were
        issued to former China Water management and insiders including Xu Hong
        Bin. Xu has challenged the cancellation with a lawsuit in Delaware
        Chancery Court. Xu recently attempted to circumvent the emerging
        evidence against him with a technical motion for partial judgment. He
        also asked the Court for an order of specific performance of the mutual
        release provisions of the March 13, 2009 Escrow Resolution and
        Transition Agreement which, if granted, could have forced the Company to
        release his contested shares. The Court denied both motions. This means
        Xu must overcome all of the Company's affirmative defenses and it means
        the Company is allowed to move forward with its counter lawsuit against
        Xu. There are 4 China Water founders involved in the 15.5 million share
        cancellation and recovery plan. Aside from Xu, one of the parties
        involved returned his 3,361,000 shares to the Company which were
        appropriately cancelled this quarter. Neither of the remaining two
        parties has taken any action against the Company in the seven months
        since they were notified of the share cancellation. $72.3 million or 41%
        of the third quarter non-cash impairment charge relates to the shares
        being contested. The value of the shares was included in the purchase
        price and written off in the impairment charge during the third quarter,
        eliminating the potential of further impact.
    --  Heckmann Corporation maintained a debt-free balance sheet as of
        September 30, 2009 with cash and cash equivalents, investments and
        marketable securities totaling approximately $274.0 million.

Third Quarter 2009 Financial Results

For the third quarter of 2009, Heckmann Corporation's net sales were $11.2 million, a 36% increase over the second quarter. China Water net sales increased 16% over the second quarter. The net loss for the third quarter was ($210.5 million), or ($1.93) per share. The Company has previously announced that final adjustments to the purchase price allocation and any resulting non-cash impairment charge would be recorded at the end of the third quarter. The details of the non-cash impairment charge and other charges recorded in the third quarter can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2009. In summary, the Company has evaluated the goodwill recorded on acquisition and has reduced it to $6.3 million (Note 5 in the 10-Q) which includes a $178.5 million non-cash impairment charge for the third quarter. The Company also recorded $29.7 million of reserves and write offs in the quarter to address other post-acquisition issues with the China Water operations.

On an adjusted basis, EBITDA for the third quarter was $403,000, versus $100,000 in the second quarter.

Commentary

Mr. Richard J. Heckmann, Chairman and CEO of Heckmann Corporation, stated, "The third quarter was the period in which we accomplished all of the necessary final actions to address past issues at China Water, prepare our domestic water business for robust operations, and position the overall business for profitable growth going forward. In three quarters, we have accomplished our stated objectives to scrub financial results, improve internal controls, and prepare a sound operational structure in China and the U.S. from which to pursue growth and expansion. The stage is now set for 2010 and beyond. While 2009 has been painful and early performance at China Water has been far below what we had hoped for, we have a new management team in China, solid relationships with our customers, and several upcoming opportunities to expand and grow. We are positioned in the heart of a great growth engine in China and fully expect to achieve long-term success.

"The water business remains an excellent long-term business opportunity in Asia and presents a sizeable and growing market with attractive prospects globally. For example, our U.S.-based produced water capabilities and the potential treatment of the disposal flows have ramifications far beyond Texas and Louisiana as we complete our first pipeline and can demonstrate our approach to one of the most severe issues in the energy exploration business. With our strong balance sheet, we are continuing to actively evaluate potential acquisitions that will further diversify our interests in water resource management and infrastructure and increase the value of our company. With our clean-up challenges now behind us, we expect a very active 2010 as we begin to realize the potential across the enterprise that we have built to date."

Conference Call Details

The Company will conduct a conference call today at 1:30 p.m. PT (4:30 p.m. ET). To participate on the conference call, please dial 888-846-5003 or 480-629-9856 and reference conference ID 4178376.

An audio replay of the conference call will be available approximately one hour after the conclusion of the call through November 16, 2009. The audio replay can be accessed by dialing 800-406-7325 or 303-590-3030 and entering access ID number 4178376.

About Heckmann Corporation

Heckmann Corporation (NYSE: HEK) is a holding company that was created to make investments in attractive businesses. The Company completed its first investment, the acquisition of China Water in October 2008, now operating as wholly-owned subsidiary, China Water & Drinks, Inc. On July 1, 2009, the Company completed its second investment, the purchase of a multi-modal salt water disposal, treatment, and pipeline transportation business in Texas, now operating as wholly-owned subsidiary, Heckmann Water Resources Corporation. The Company also makes strategic minority interest investments, such as its recent investment in Underground Solutions, Inc. (OTC: UGSI).

Interested stockholders and investors can access additional information about Heckmann on the Company's web site at www.heckmanncorp.com, and in documents filed with the U.S. Securities and Exchange Commission, on the SEC's web site at www.sec.gov.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. These forward-looking statements inherently involve certain risks and uncertainties that are detailed in the Company's filings with the Securities and Exchange Commission and available at www.sec.gov as well as the Company's website at www.heckmanncorp.com . You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. All forward-looking statements are qualified in their entirety by this cautionary statement. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The equity buy-back plan discussed in this press release could result in holders selling shares of common stock or warrants back to the Company at prices that are lower or higher than later market prices, the price that holders receive for their common stock or warrants in any sale of the Company as a whole, or the price at which future shares of common stock or warrants are sold by the Company

Heckmann Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

                                                   September 30,    December 31,

                                                   2009             2008

ASSETS                                             (unaudited)

Current Assets

Cash and cash equivalents                        $ 153,029        $ 281,683

Restricted cash                                    2,000            -

Certificates of deposit                            10,050           10,000

Marketable securities                              13,070           -

Accounts receivable, net                           5,916            26,460

Inventories, net                                   5,792            2,241

Prepaid expenses                                   512              8,842

Other receivables                                  4,366            1,548

Due from related party                             511              1,381

Income tax receivable                              699              969

Other current assets                               9                544

Total current assets                               195,954          333,668

Property, plant and equipment, net                 26,114           15,901

Marketable securities                              89,347           38,717

Deposits                                           261              16,608

Investment in unconsolidated equity investee       4,267            12,964

Investment in UGSI                                 6,801            -

Intangible assets, net                             23,738           29,879

Goodwill                                           13,600           315,018

Other                                              211              338

TOTAL ASSETS                                     $ 360,293        $ 763,093

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable                                 $ 13,895         $ 9,550

Deferred revenue                                   4,226            1,209

Accrued expenses                                   17,213           2,208

Current portion of long term debt                  790              36

Income taxes payable                               1,351            440

Due to related parties                             195              963

Deferred income taxes                              432              77

Total current liabilities                          38,102           14,483

Acquisition consideration payable                  1,910            1,910

Long-term debt, less current portion               -                96

Other LT Liabilities                               3,704            -

TOTAL LIABILITIES                                  43,716           16,489

Equity:

Shareholders' equity of the Company:

Preferred stock, $0.001 par value, 1,000,000
shares authorized; no shares issued or             -                -
outstanding

Common stock, $0.001 par value: 500,000,000 and
250,000,000 shares authorized at September 30,
2009 and December 31, 2008, respectively,
125,282,740 shares issued and 108,750,650          124              126
shares outstanding at September 30, 2009,
respectively, 126,606,323 shares issued and
110,074,233 shares outstanding at December 31,
2008, respectively

Additional paid-in capital                         745,856          757,720

Purchased warrants                                 (4,810)          (405)

Treasury stock                                     (14,000)         -

Accumulated deficit                                (413,802)        (13,771)

Accumulated other comprehensive income             688              89

Total shareholders' equity of the Company          314,056          743,759

Noncontrolling interest                            2,521            2,845

TOTAL EQUITY                                       316,577          746,604

TOTAL LIABILITIES AND EQUITY                     $ 360,293        $ 763,093

Heckmann Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except share and per share data)

                      Three Months Ended Sept 30,   Nine Months Ended Sept 30,

                        2009           2008           2009           2008

                        (unaudited)    (unaudited)    (unaudited)    (unaudited)

Revenue               $ 11,235       $ -            $ 27,315       $ -

Cost of goods sold      8,988          -              20,415         -

Gross profit            2,247          -              6,900          -

Operating expenses:

Selling and             791            -              2,218          -
marketing expenses

General and
administrative          26,753         460            37,677         1,248
expenses

Goodwill impairment     178,553        -              362,553        -

Impairment of
property, plant and     6,223          -              6,223          -
equipment

Total operating         212,320        460            408,671        1,248
expenses

Loss from operations    (210,073)      (460)          (401,771)      (1,248)

Interest income, net    863            2,569          3,048          9,416

Income from equity      (124)          -              211            -
method investment

Other, net              (688)          -              (407)          -

(Loss) income before    (210,022)      2,109          (398,919)      8,168
income taxes

Income tax expense      (476)          (859)          (896)          (3,224)

Net (loss) income       (210,498)      1,250          (399,815)      4,944

Less: Net income
attributable to the     (61)           -              (216)          -
noncontrolling
interest

Net (loss) income
attributable to the     (210,559)      1,250          (400,031)      4,944
Company

Deferred interest
income, net of
taxes, attributable     -              (244)          -              (155)
to common stock
subject to possible
redemption

Net (loss) income
attributable to       $ (210,559)    $ 1,006        $ (400,031)    $ 4,789
common stockholders

(Loss) earnings per
share - basic and
diluted

(Loss) income
attributable to the
Company's common
shareholders:

Basic and diluted     $ (1.93)       $ 0.01         $ (3.64)       $ 0.07

Weighted average
number of shares        109,275,628    67,646,800     109,852,879    67,646,800
outstanding, basic
and diluted

Heckmann Corporation and Subsidiaries

Adjusted EBITDA for the Three Months Ended September 30, 2009

(In millions)

Pretax income                        $ (210.0)

Less: Interest income                  (0.8)

Add:

Depreciation                           0.8

Amortization                           0.2

Non-cash goodwill impairment charge    178.6

China Water reserves & write-offs      13.0

China Water fixed assets write-offs    6.2

ShenYang deconsolidation               5.3

Xu reimbursement & legal               5.0

Chen Settlement                        0.8

Beijing exit costs                     0.5

Beijing & Shenyang Q3 losses           0.3

Stock based compensation               0.2

HWR transaction costs                  0.2

Severance costs                        0.1

Adjusted EBITDA                      $ 0.4

    Source: Heckmann Corporation

Related Categories

Press Releases

Stocks Mentioned

Related Entities

• Haynesville Shale

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?