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Heckman Files 10Q…Progress

Been about a month (3 weeks) since we first talked about this intriguing pick. I have not bought shares (up 13% since then).

One interesting note is that on Aug. 10th the board authorized they approved a 1-year extension of the Company’s discretionary equity buy-back plan and an expansion of the plan to include common stock. Under the broadened plan, the Company may purchase warrants and up to 20 million shares of common stock in open market and private transactions through December 31, 2010, at times and in amounts as management deems appropriate, subject to applicable securities laws. 20 million shares is 18% of the outstanding total as of 6/1/2009.

Heckman said:

Mr. Richard J. Heckmann, Chairman and CEO of Heckmann Corporation, stated, “We have successfully closed both of our pending diversified water business transactions and are currently in the process of installing a 40-mile pipeline that will serve customers seeking to dispose of saltwater and frac fluid generated in oil and gas operations. Once this pipeline is operational by year-end, we expect a substantial contribution to revenue and earnings from our new subsidiary Heckmann Corp.

“We also made significant progress during the second quarter on our China business strategy,” Mr. Heckmann continued. “Renovation and installation of our bottled water and non-carbonated drink facility in Xi’an is nearing completion, which will significantly improve our capacity and utilization metrics as we service major contracts like Coca-Cola China as well as other recently established bottling and servicing contracts.

“We also bolstered the management team and continued optimizing the financial reporting structure in China as we prepare to fully participate in the growth and expansion that experts and economists are predicting for that region over the long term. At the same time, we recovered a portion of shares and warrants issued to former China Water insiders and are confident that we will fully execute this plan in due course. We expect to obtain a final determination on the purchase price allocation for our China Water acquisition during the current quarter. Our cash and investment balance remained essentially unchanged for the second quarter, and we maintained a strong balance sheet that holds approximately $298 million in cash and investments as of June 30 — ample resources to pursue our acquisition objectives, continue the optimization of current assets and maximize opportunities in our businesses as they unfold,” Mr. Heckmann concluded.

The business is tracking as one would like to see since Q1. It would appear the China water business, once they clear out the mess has great potential with existing contracts and the expansion of the business with Coke China.

Greer exploration is in a great business that will just keep producing revenues as its services are essential to the industry it serves.

What remains to be seen it what happens next. The $298m cash on hand is essentially 75% of the companies current market cap and there still is zero debt. I like that a lot as it provides huge flexibility AND allows the company to make the right long term decisions with the pressure of creditors.

Still not 100% sold yet BUT am becoming more interested. Will keep on it.

Heckman 10Q Q2 2009


Disclosure (“none” means no position):

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Heckman Corp….

Was alerted by reader Enrico to the following article on Richard Heckman and the more I read, the more interested I got.

Some quick valuation numbers:
Assets= $456m (after $184m goodwill write-down on China Water assets)
Liab. = $13m
Debt = $0
Cash = $199m
M Cap = $350m

From the company’s website:

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 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).

We have a strong balance sheet and seek additional acquisition opportunities as we build a worldwide enterprise. As of March 31, 2009, we had $300 million dollars in invested cash and cash equivalents. We intend to make additional investments and acquisitions as we find attractive long-term opportunities for our stockholders.

PE.com reported on the China Water deal:

Palm Desert entrepreneur Richard Heckmann is diving back into the water business, with an aim to consolidate the bottled water industry in Asia, much like he did in the United States to the tune of billions in revenue.

The former chief executive of Palm Desert-based US Filter said early Tuesday that his acquisition firm would acquire China Water and Drinks Inc. for about $625 million. Heckmann said China’s rampant groundwater pollution, coupled with its population of 1.3 billion people, provide for an ample market. About 250 companies produce and sell bottled water in China, a hefty number that Heckmann said he hopes to consolidate.

During the conference call, Heckmann said China Water ranks fifth in overall revenue among competitors in Asia, behind Coca-Cola China….

…Heckmann’s blank-check company raised $450 million in an initial public offering in November. At that time, Heckmann was coy about what companies he would be interested in buying.

“We like water, but we like everything,” he said last year.

I really like this. It is another buy for less than book value ($4.02) in a company with no debt and near 50% of the share price is cash on the books. The two businesses they have bought to this point are very good businesses. China Water is a leader in its field there (yes there was a problem with some folks there “skimming” but that has been address and their shares/warrants cancelled, hey, its China) and the Greer Exploration is a very interesting business that oil & gas companies cannot do without (a better explanation of it is in the release that follows).

CEO and Chairman Richard Heckman owns just under 12% of the outstanding shares. Goldman Sachs (GS) recently (last quarter) took a 4.7m share stake in the company.

This is a play a bit like Compass Diversified Holding (CODI). Growth will come from the businesses they buy and sell.

Here is a press release updating the current investments the corp. has made:
hek1

Agreement to buy Greer Exploration:
Heck 2

Here is the China Water Presentation:
hek


Disclosure (“none” means no position):None ….Yet

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Friday’s Links

Heckman, CMBS, Kmart,

– Great article/interview. Hat tip reader “Enrico”.

– Another reason to close the rating agencies

– This is a great idea….make the products more accessible to people will equal more sales


Disclosure (“none” means no position):

Categories
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Friday's Links

Heckman, CMBS, Kmart,

– Great article/interview. Hat tip reader “Enrico”.

– Another reason to close the rating agencies

– This is a great idea….make the products more accessible to people will equal more sales


Disclosure (“none” means no position):