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Heckmann Corporation has a market cap of $627.5 million; its shares were traded at around $5.77 with and P/S ratio of 17.5. HEK is in the portfolios of Michael Price of MFP Investors LLC, Ron Baron of Baron Funds, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Headquartered in Palm Desert, California, the Company was incorporated in Delaware on May 29, 2007. We began our corporate existence as a blank check development stage company. On November 16, 2007, we completed an IPO of 54,116,800 units (each consisting of one share of common stock and one warrant exercisable for an additional share of common stock), including 4,116,800 units issued pursuant to the partial exercise of the underwriters’ over-allotment option, and received net proceeds of approximately $421 million. On the same date, we also completed a private placement of warrants to our founders at an aggregate purchase price of $7 million, or $1.00 per warrant.
Our net sales for the three months ended March 31, 2010 were $8.6 million, which represents $6.5 million of sales of bottled water and $2.1 million of revenues from water disposal compared to $7.8 million for the three months ended March 31, 2009, all of which represents sales of bottled water. Sales for the three months ended March 31, 2009 included approximately $0.7 million of sales from the Beijing and Shen Yang Aixin factories. In September 2009 the Company announced the restructuring of the Beijing factory and the deconsolidation of the Shen Yang Aixin factory (see Notes 2 and 4 in our Annual Report on form 10-K for the year ended December 31, 2009). Accordingly there are no sales reported in the three months ended March 31, 2010 for either Beijing or Shen Yang Aixin.
The cost of goods sold for the three months ended March 31, 2010, including approximately $0.9 million of depreciation expense, was $6.8 million, resulting in total gross profit of $1.8 million, or 20.7% of net sales. Gross profit from bottles water sales, in the seasonally slow quarter ended March 31, 2010, was $1.3 million, or 20.6% of net sales. Gross profit of $0.5 million, or 21.2%, was attributable to HWR’s water disposal revenues. Additional expense of approximately $0.2 million for pipeline start-up costs negatively impacted HWR water disposal gross margin for the three months ended March 31, 2010. The cost of goods sold for the three months ended March 31, 2009, including approximately $0.3 million of depreciation expense, was $5.2 million, resulting in total gross profit of $2.6 million, or 33.5% of net sales.
General and administrative expenses for the three months ended March 31, 2010 were $2.8 million and includes approximately $0.3 million of stock-based compensation and amortization expense of approximately $0.4 million. General and administrative expenses for the three months ended March 31, 2009 were $5.4 million and includes approximately $1.0 million of amortization expense and approximately $2.0 million of bad debt expense. During the three months ended March 31, 2009, the Company recorded a $184.0 million non-cash goodwill impairment charge related to its acquisition of China Water (see Note 3 in our Annual Report on Form 10-K for the year ended December 31, 2009).
Net cash used in operating activities was $6.7 million for the three months ended March 31, 2010. Cash used by operating activities was primarily driven by working capital changes, which were principally decreases to accounts payable and accrued expenses of $7.2 million, offset by increases in prepaid expenses and other receivables of approximately $1.0 million.
Net cash provided by investing activities was $29.9 million for the three months ended March 31, 2010. Of this amount, $45.2 million was received from the sale of securities, offset by the use of $11.2 million for investments in high grade corporate notes and the use of $4.1 million for the purchase of machinery and equipment.
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