FORM 8-K/A

0001193125-12-330463.txt : 20120802 0001193125-12-330463.hdr.sgml : 20120802 20120802083757 ACCESSION NUMBER: 0001193125-12-330463 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20120607 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120802 DATE AS OF CHANGE: 20120802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUALITY DISTRIBUTION INC CENTRAL INDEX KEY: 0000922863 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 593239073 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24180 FILM NUMBER: 121001845 BUSINESS ADDRESS: STREET 1: 4041 PARK OAKS BOULEVARD STREET 2: SUITE 200 CITY: TAMPA STATE: FL ZIP: 33610 BUSINESS PHONE: 8136305826 MAIL ADDRESS: STREET 1: 4041 PARK OAKS BOULEVARD STREET 2: SUITE 200 CITY: TAMPA STATE: FL ZIP: 33610 FORMER COMPANY: FORMER CONFORMED NAME: MTL INC DATE OF NAME CHANGE: 19940509 8-K/A 1 d382598d8ka.htm FORM 8-K/A FORM 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

AMENDMENT NO. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)

June 7, 2012

QUALITY DISTRIBUTION, INC.

(Exact name of registrant as specified in its charter)

Florida

000-24180

59-3239073

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

4041 Park Oaks Boulevard, Suite 200

Tampa, Florida 33610

(Address of principal executive offices including Zip Code)

(813) 630-5826

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This Amendment No. 1 on Form 8-K/A is being filed to amend the Current Report on Form 8-K (the “Initial 8-K”) filed with the Securities and Exchange Commission on June 7, 2012, by Quality Distribution, Inc. (“Quality”), to include the financial information referred to in Item 9.01(a) and (b) below relating to the completion of the acquisition of assets of Wylie Bice Trucking, LLC (“Bice”) and RM Resources, LLC (“RM”) on June 1 and 11, 2012, respectively. Pursuant to the instructions to Item 9.01 of Form 8-K, Quality hereby amends Item 9.01 of the Initial 8-K to include previously omitted financial information.

Item 9.01 Financial Statements and Exhibits

(a)

Financial Statements of Business Acquired.

The audited statement of financial position of Bice and RM as of December 31, 2011, the related statement of operations, changes in members’ equity, and cash flows for the year then ended are attached as Exhibit 99.1.

The unaudited interim financial statements of Bice and RM as of and for the three months ended March 31, 2012 and 2011 are attached as Exhibit 99.2.

(b)

Pro Forma Financial Information.

On June 1 and June 11, 2012, Quality completed its acquisition of assets of Bice and RM, respectively. Attached hereto as Exhibit 99.3 are the following pro forma financial statements:

Unaudited pro forma combined statements of operations for the three months ended March 31, 2012 and the twelve months ended December 31, 2011 which gives effect to the assets acquired of Bice and RM as if they had occurred on January 1, 2011.

Unaudited pro forma combined balance sheet as of March 31, 2012, which gives effect to the assets acquired of Bice and RM as if they had occurred on January 1, 2011.

(c)

Shell Company Transactions.

Not applicable.

(d)

Exhibits


Exhibit No.		Description of the Exhibit

Exhibit 23.1		Consent of independent certified public accountants.

Exhibit 99.1		Audited statement of financial position of Wylie Bice Trucking, LLC as of December 31, 2011, and the related statement of operations, changes in member’s equity, and cash flows for the twelve months then ended.

Exhibit 99.2		Audited statement of financial position of RM Resources, LLC as of December 31, 2011, and the related statement of operations, changes in members’ equity, and cash flows for the twelve months then ended.

Exhibit 99.3		Unaudited interim financial statements for Wylie Bice Trucking, LLC as of and for the three months ended March 31, 2012 and 2011.

Exhibit 99.4		Unaudited interim financial statements for RM Resources, LLC as of and for the three months ended March 31, 2012 and 2011.

Exhibit 99.5		Unaudited pro forma combined financial information.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 2, 2012


QUALITY DISTRIBUTION, INC.

By:		/s/ Joseph J. Troy
Name:		Joseph J. Troy
Title:		Executive Vice President and Chief Financial Officer

Exhibit Index


Exhibit 23.1		Consent of independent certified public accountants.

Exhibit 99.1		Audited statement of financial position of Wylie Bice Trucking, LLC as of December 31, 2011, and the related statement of operations, changes in member’s equity, and cash flows for the twelve months then ended.

Exhibit 99.2		Audited statement of financial position of RM Resources, LLC as of December 31, 2011, and the related statement of operations, changes in members’ equity, and cash flows for the twelve months then ended.

Exhibit 99.3		Unaudited interim financial statements for Wylie Bice Trucking, LLC as of and for the three months ended March 31, 2012 and 2011.

Exhibit 99.4		Unaudited interim financial statements for RM Resources, LLC as of and for the three months ended March 31, 2012 and 2011.

Exhibit 99.5		Unaudited pro forma combined financial information.

EX-23.1 2 d382598dex231.htm CONSENT OF INDEPENDENT CONSENT OF INDEPENDENT

Exhibit 23.1

Consent of Independent Certified Public Accountants

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-175094), Form S-8 (No. 333-133408) and Form S-8 (No. 333-182552) of Quality Distribution, Inc. of our report dated June 1, 2012 relating to the financial statements of Wylie Bice Trucking, LLC, which appears in this Current Report on Form 8-K of Quality Distribution, Inc.

We also hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-175094), Form S-8 (No. 333-133408) and Form S-8 (No. 333-182552) of Quality Distribution, Inc. of our report dated June 1, 2012 relating to the financial statements of RM Resources, LLC, which appears in this Current Report on Form 8-K of Quality Distribution, Inc. dated June 1, 2012.

/s/ PricewaterhouseCoopers LLP

Tampa, FL

August 2, 2012

EX-99.1 3 d382598dex991.htm AUDITED STATEMENT OF FINANCIAL POSITION OF WYLIE BICE TRUCKING AUDITED STATEMENT OF FINANCIAL POSITION OF WYLIE BICE TRUCKING

Exhibit 99.1

Wylie Bice Trucking, LLC

Financial Statements

December 31, 2011

Wylie Bice Trucking, LLC

Index

December 31, 2011


	Page(s)

Report of Independent Certified Public Accountants		1

Financial Statements

Statement of Financial Position		2

Statement of Operations		3

Statement of Changes in Member’s Equity		4

Statement of Cash Flows		5

Notes to Financial Statements		6–12

LOGO

Report of Independent Certified Public Accountants

To the Member Owner of

Wylie Bice Trucking, LLC

In our opinion, the accompanying statements of financial position and the related statements of operations, of changes in member’s equity and of cash flows present fairly, in all material respects, the financial position of Wylie Bice Trucking, LLC (the “Company”) at December 31, 2011, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

June 1, 2012

PricewaterhouseCoopers LLP, 4221 West Boy Scout Boulevard, Suite 200, Tampa, FL 33607-5745

T: (813) 229 0221, F: (813) 229 3646, www.pwc.com/us

Wylie Bice Trucking, LLC

Statement of Financial Position

December 31, 2011


(in thousands)

Assets
Current assets
Cash and cash equivalents	$	1,773
Accounts receivable, net		28,871
Prepaid expenses		194

Total current assets		30,838

Property and equipment, net		9,793

Other assets		169

Total assets	$	40,800


Liabilities and Member’s Equity

Current liabilities
Current maturities of indebtedness	$	1,124
Factoring advances liability		10,472
Current maturities of capital lease obligations		972
Independent owner-operators payable		13,689
Accounts payable		7,041
Accrued expenses		479

Total current liabilities		33,777

Long-term indebtedness, less current maturities		3,187

Capital lease obligations, less current maturities		2,780

Total liabilities		39,744
Member’s equity		1,056


Total liabilities and member’s equity	$	40,800

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Statement of Operations

Year Ended December 31, 2011


(in thousands)

Operating revenues
Transportation revenue	$	88,056
Service revenues		14,382

Total operating revenues		102,438


Operating expenses
Purchased transportation		73,234
Fuel, supplies and maintenance		11,757
Compensation		3,082
Payroll service expense		4,499
Depreciation		1,213
Selling and administrative		1,796
Insurance costs		203
Taxes and licenses		80
Communication and utilities		102

Total operating expenses		95,966

Operating income		6,472

Interest expense		1,304
Interest income		(5	)
Other expense		4

Net income	$	5,169

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Statement of Changes in Member’s Equity

Year Ended December 31, 2011


(in thousands)	Total Member’s Equity (Deficit)

Balance at December 31, 2010	$	(524	)

Net income		5,169
Member draws		(3,589	)


Balance at December 31, 2011	$	1,056

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Statement of Cash Flows

Year Ended December 31, 2011


(in thousands)

Cash flows from operating activities
Net income	$	5,169
Adjustments to reconcile income to net cash used in operating activities
Depreciation		1,213
Bad debt expense		840
Changes in assets and liabilities
Accounts receivables		(26,824	)
Prepaid expenses		(159	)
Other assets		(112	)
Independent owner-operators payable		11,177
Accounts payable		6,713
Accrued expenses		449

Net cash used in operating activities		(1,534	)

Cash flows from investing activities
Capital expenditures		(4,057	)

Net cash used in investing activities		(4,057	)

Cash flows from financing activities
Proceeds from issuance of long-term loan obligations		1,319
Principal payments on long-term loan obligations		(179	)
Principal payments on capital lease obligations		(679	)
Proceeds from factoring advance arrangements		18,849
Payments on factoring advance arrangements		(8,888	)
Member draws		(3,589	)

Net cash provided by financing activities		6,833

Net increase in cash and cash equivalents		1,242

Cash and cash equivalents
Beginning of year		531

End of year	$	1,773

Supplemental disclosure of cash flow information
Cash paid during the year for interest	$	465

Supplemental disclosure of noncash flow information
Capital lease obligations and lease residual guarantees		2,394

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

1.	Nature of Business and Operations

Wylie Bice Trucking LLC, incorporated February 26, 2006 in Killdeer, North Dakota (the “Company”), is engaged in the transportation of fresh, flowback and production water, and oil to the unconventional oil and gas market within the Bakken Shale.

2.	Significant Accounting Policies

Basis of Presentation

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States using U.S. dollars as the reporting currency.

Accounting Estimates

The use of estimates is inherent in the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers highly liquid investments with an original maturity of three months or less from the acquisition date to be cash equivalents. Book overdrafts are included in accounts payable.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. The Company’s cash and cash equivalents are maintained at major U.S. financial institutions. Deposits in these institutions may exceed the amount of insurance provided on such deposits. The Company’s customers are concentrated in the United States. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and other information.

The Company has three customers that represent approximately 51% of its operating revenues for the year ended December 31, 2011. Two of these customers represent 45% of its accounts receivable as of December 31, 2011. These three customers have shown no indication of default and are current on their outstanding receivables.

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

Accounts Receivable Factoring

In July 2011, the Company entered into a one year accounts receivable factoring arrangement (the “ Agreement”) with a financial institution (the “Factor”). Pursuant to the terms of this Agreement, the Company, from time to time obtains advances from the Factor against certain of its accounts receivable balances. The Factor then remits 80% of the accounts receivable balance, less a 1% factor fee to the Company (the “Advance Amount”). The remaining balance is forwarded to the Company once the Factor collects the full accounts receivable balance from the customer. As of December 31, 2011, the Company had amounts due to them of $2.6 million relating to the factoring arrangement and a factoring advance liability of $10.5 million. The Agreement allows the Company to obtain loans against the outstanding accounts receivable balance not factored. The Company uses this Agreement to assist with its general working capital requirements. As of December 31, 2011, the Company has no outstanding loan balance under the Agreement. All assets are pledged as collateral including records, inventory, and certain (equipment other than rolling stock of titled tractors and trailers).

Allowance for Uncollectible Receivables

The Company has established a reserve for uncollectible receivables based on a combination of historical data, cash payment trends, specific customer issues, write-off trends, general economic conditions and other factors. The Company charges uncollectible amounts to its allowance based on various factors, including cash payment trends and specific customer issues. These factors are continuously monitored by management to arrive at the estimate for the amount of accounts receivable that may be ultimately uncollectible. The receivables covered in the uncollectible reserve analysis include trade receivables.

Property and Equipment

Property and equipment expenditures are recorded at cost. For financial statement purposes, these assets are depreciated using the straight-line method over the estimated useful lives of the assets to an estimated salvage value.

Depreciation

The Company computes depreciation primarily by the straight-line method at annual rates that amortize the original cost, less net salvage value, of depreciable property.

The average lives of assets are as follows:


		Average Lives (in Years)

Buildings and improvements		10 – 39
Other equipment		3 – 10
Trailers		10 – 20
Tractors and terminal equipment		5 – 7

Maintenance and repairs are charged directly to expense as incurred. Major improvements that extend the lives of the assets are capitalized. Management estimates the useful lives of these assets based on historical trends and the age of the assets when placed in service, and any changes in the actual lives could result in material changes in the periodic depreciation and resulting net book value of these assets. Additionally, the salvage values of assets is based on historical sales of disposals, and any changes in the actual salvage values could also affect the periodic depreciation and resulting net book value of the assets.

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

Independent Owner-Operator Payable

Independent owner-operators are independent contractors, who, through a contract with the Company, supply one or more tractors and drivers for our use. Contracts with independent contractors may be terminated by either party on short notice. Although the majority of the independent owner-operators supply their own trailers, they each have the option of renting trailers from us for a charge. In exchange for services rendered, independent owner-operators are normally paid on an hourly basis for each load hauled. The Company settles with the independent owner-operators twice a month.

Asset Impairment

The Company applies the provisions of the accounting guidance for the impairment or disposal of long-lived assets. In accordance with this guidance, the Company assesses whether there has been an impairment of its long-lived assets held and used by the Company, when such impairment indicators exist. No such indicators of impairment existed as of December 31, 2011.

Income Taxes

The Company is a limited liability company which results in a pass-through for income tax purposes. Therefore, there is no income tax liability as of December 31, 2011.

Revenue Recognition

Transportation revenues are recognized on the date freight is delivered. Service revenues consist primarily of rental revenues (primarily month to month tractor and trailer rental), water hauling revenue, repair shop revenue and payroll related services. Rental revenues from independent owner-operators and third parties are recognized ratably over the respective lease period. Water revenues are recognized on the date freight is delivered. Repair shop revenues are recognized on the date the service is completed. The Company recognizes all revenues on a gross basis as the principal and primary obligor with risk of loss in relation to the Company’s responsibility for completion of services as contracted with customers.

Service Revenues

The components of service revenues are as follows for the year ended December 31, 2011 (In thousands):


Rental revenue	$	375
Water revenue		7,178
Repair shop revenue		2,330
Other revenue		4,499

	$	14,382

Leased Assets

The Company utilizes both capital and operating leases. The initial leases for most of its tractors and trailers have terms that range from two to six years with implicit interest rates ranging from 4.25% to 41.80%. Some capital leases require the Company to pay the lessor a minimum residual amount at the end of the lease. These residual amounts are recorded in the statement of financial position as capital lease obligations, less current maturities. Each asset under capital lease is pledged as collateral against default. The Company expects the costs associated with these leases to be partially offset by rental revenue from subleasing the tractors to independent owner-operators.

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

3.	New Accounting Pronouncements

Offsetting Assets and Liabilities

In December 2011, the Financial Accounting Standards Board (“FASB”) issued guidance enhancing disclosures of financial instruments and derivative instruments that are offset in the statement of financial position or subject to enforceable master netting agreements. The guidance is effective for interim and annual reporting periods beginning on or after January 1, 2013. The Company believes the adoption of this statement will have no effect on the Company’s financial position, result of operations or cash flows.

Presentation of Comprehensive Income

In June 2011, the FASB issued guidance requiring companies to present the total of comprehensive income, the components of net income and the components of other comprehensive income, in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for interim and annual periods beginning after December 15, 2012. The Company believes the adoption of this statement will have no effect on the Company’s financial position, result of operations or cash flows.

Additionally, in December 2011, the FASB issued guidance that indefinitely delayed the effective date of the requirement to present the reclassification adjustment out of accumulated other comprehensive income. The guidance is effective for interim and annual periods beginning after December 15, 2012. The Company believes the adoption of this statement will have no effect on the Company’s financial position, result of operations or cash flows.

4.	Accounts Receivable

Accounts receivable consists of the following at December 31, 2011 (in thousands):


Trade accounts receivable	$	26,078
Receivables due from factoring		2,621
Independent owner-operator receivables		731
Other receivables		281

		29,711

Less: Allowance for doubtful accounts		(840	)

	$	28,871

The activity in the allowance for doubtful accounts for the year ended December 31, 2011 is as follows (in thousands):


Balance at beginning of year	$	—

Adjustment to bad debt expense		(840	)
Write-offs, net of recoveries		—

Balance at end of year	$	(840	)

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

5.	Property and Equipment

Property and equipment consists of the following at December 31, 2011 (in thousands):


Land and improvements	$	60
Buildings and improvements		801
Other equipment		1,657
Trailers, tractors, and terminal equipment		9,383

Total property and equipment		11,901

Accumulated depreciation		(2,108	)

Property and equipment, net	$	9,793

Depreciation expense was $1.2 million for the year ended December 31, 2011. At December 31, 2011, the Company had $4.7 million of capitalized costs and $1.2 million of accumulated depreciation related to equipment under capital leases such amounts are included in revenue equipment in the above schedule.

6.	Accrued Expenses

Accrued expenses include the following at December 31, 2011 (in thousands):


Salaries, wages and benefits	$	462
Accrued interest		17

	$	479

7.	Long-Term Indebtedness

Long-term debt consisted of the following at December 31, 2011 (in thousands):


Equipment loans	$	4,311
Capital lease obligations		3,752

Long-term obligations, including current maturities		8,063

Less: Current maturities of long-term obligations (including capital lease obligations)		(2,096	)


Long-term obligations, less current maturities (including capital lease obligations)	$	5,967

Equipment Loans

The Company entered into multiple financing agreements with various lenders for the purchase of tractors, trailers and other equipment. The initial agreements have terms that range from two to five years with interest rates ranging from approximately 4.99% to 17.50%. There are no covenants associated with these financing agreements.

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

Debt Retirement

The following is a repayment schedule of indebtedness at December 31, 2011 over the periods the Company is required to pay such indebtedness (in thousands):


	2012		2013		2014		2015		2016 and After		Total

Equipment Loans	$	1,124	$	974	$	970	$	1,103	$	140	$	4,311
Capital lease obligations		972		1,038		1,327		415		—		3,752

	$	2,096	$	2,012	$	2,297	$	1,518	$	140	$	8,063

8.	Commitments and Contingencies

Litigation

The Company is involved in various legal proceedings that have arisen in the ordinary course of business. In the opinion of the Company’s management, all such proceedings are adequately covered by insurance or, if not so covered, should not materially result in any liability which would have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Operating Leases

The Company is obligated under various noncancelable operating leases for office equipment, revenue equipment and vehicles. As of December 31, 2011, future noncancelable lease commitments (excluding any sublease income) are approximately $32,000, which are payable in 2012.

The Company expects that some of its operating lease commitments will be partially offset by rental revenue from subleasing the tractors to independent affiliates and independent owner-operators and subleasing trailers to independent affiliates. Rent expense under operating leases was $0.1 million for the year ended December 31, 2011.

9.	Transactions With Related Parties

During 2011, the Company purchased from RM Resources, LLC (“RM”), a company which is 33% owned by Wylie Bice, the owner of the Company, $4.8 million for water disposal services. Of this total, $1.8 million is included in accounts payable as of December 31, 2011. The services purchased from RM by the Company are a passthrough of collections received from customers. The Company records water disposal revenue as service revenues with the corresponding expense in fuel, supplies and maintenance.

Wylie Bice Trucking, LLC

Notes to Financial Statements

December 31, 2011

The Company recognized $1.5 million of revenue from Red Rock Rentals, LLC (“Red Rock”), which is owned by Dean Rodne, who also owns 33% of RM for services related to equipment rentals included in service revenue.

The Company also performs payroll services, which includes paying driver wages, on behalf of other owner operators. The Company is subsequently reimbursed by the owner operators for those payments. The Company records the reimbursed payroll within service revenue, $4.5 million for the year ended December 31, 2011, and records a corresponding expense in payroll service expenses.

10.

Subsequent Events

On May 7, 2012, the Company’s sole member entered into an asset purchase agreement with Quality Carriers, Inc. to sell the operating assets of the Company for $47.6 million, plus potential additional consideration of $11.4 million if certain future operating and performance criteria are satisfied. On June 1, 2012, this sale was consummated for an adjusted purchase price of $51.0 million.

EX-99.2 4 d382598dex992.htm AUDITED STATEMENT OF FINANCIAL POSITION OF RM RESOURCES AUDITED STATEMENT OF FINANCIAL POSITION OF RM RESOURCES

Exhibit 99.2

RM Resources, LLC

Financial Statements

December 31, 2011

RM Resources, LLC

Index

December 31, 2011


	Page(s)

Report of Independent Certified Public Accountants		1

Financial Statements

Statement of Financial Position		2

Statement of Operations		3

Statement of Changes in Members’ Equity		4

Statement of Cash Flows		5

Notes to the Financial Statements		6–10

LOGO

Report of Independent Certified Public Accountants

To the Member Owners of

RM Resources, LLC

In our opinion, the accompanying statement of financial position and the related statements of operations, of changes in members’ equity and of cash flows present fairly, in all material respects, the financial position of RM Resources, LLC (the “Company”) at December 31, 2011, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

June 1, 2012

PricewaterhouseCoopers LLP, 4221 West Boy Scout Boulevard, Suite 200, Tampa, FL 33607-5745

T: (8 13) 229 0221, F: (813) 229 3646, www.pwc.com/us

RM Resources, LLC

Statement of Financial Position

December 31, 2011


(in thousands)

Assets
Current assets
Cash and cash equivalents	$	1,605
Accounts receivable, net		1,989
Other		47

Total current assets		3,641

Property and equipment, net		4,139
Other assets		121

Total assets	$	7,901


Liabilities and Members’ equity
Current liabilities
Accounts payable	$	469

Total current liabilities		469

Asset retirement obligations		550

Total liabilities		1,019

Members’ Equity		6,882


Total liabilities and members’ equity	$	7,901

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Statement of Operations

Year Ended December 31, 2011


(in thousands)

Operating revenues
Service revenues	$	8,004

Total operating revenues		8,004


Operating expenses
Fuel, supplies and maintenance		1,675
Depreciation and amortization		318
Selling and administrative		1,710
Insurance costs		45
Communication and utilities		145

Total operating expenses		3,893

Operating income		4,111

Interest expense		16

Net income	$	4,095

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Statement of Changes in Members’ Equity

Year Ended December 31, 2011


(in thousands)	Total Members’ Equity

Balance at December 31, 2010		3,837

Net income		4,095
Distributions to members		(1,050	)

Balance at December 31, 2011	$	6,882

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Statement of Cash Flows

Year Ended December 31, 2011


(in thousands)

Cash flows from operating activities
Net income	$	4,095
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		318
Bad debt expense		15
Retirement of disposal wells		321
Changes in assets and liabilities
Accounts receivables		(584	)
Other assets		(40	)
Accounts payable		102
Asset retirement obligations		190

Net cash provided by operating activities		4,417

Cash flows from investing activities
Capital expenditures		(2,450	)

Net cash used in investing activities		(2,450	)

Cash flows from financing activities
Members distributions		(1,050	)

Net cash used in financing activities		(1,050	)

Net increase in cash and cash equivalents		917

Cash and cash equivalents
Beginning of year		688

End of year	$	1,605

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Notes to Financial Statements

December 31, 2011

1.	Nature of Business and Operations

RM Resources, LLC, incorporated April 15, 2008 in Medora, North Dakota (the “Company” or “RM”), operates four salt water injection disposal wells within the Bakken Shale. All four wells are considered to be Type II wells in accordance with the Environmental Protection Agency (“EPA”) Title 40 Regulation. Type II wells inject nonhazardous fluids associated with oil and natural gas production. Most of the injected fluid is salt water (brine), which is brought to the surface in the process of producing (extracting) oil and gas. In addition, brine and other fluids are injected to enhance (improve) oil and gas production.

The Company is owned by three members, each with equal interests, rights, preferences and privileges.

2.	Significant Accounting Policies

Basis of Presentation

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States using U.S. dollars as the reporting currency.

Accounting Estimates

The use of estimates is inherent in the preparation of financial statements in accordance with generally accepted accounting principles (“GAAP”). Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers highly liquid investments with an original maturity of three months or less from the acquisition date to be cash equivalents.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. The Company’s cash and cash equivalents are maintained at U.S. financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Deposits in these institutions may exceed the amount of insurance provided on such deposits. The Company’s customers are concentrated in the United States. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and other information.

The Company has one customer, Wylie Bice Trucking, LLC (“WBT”), which makes up approximately 59% of its revenue for the year ended December 31, 2011 and approximately 89% of its accounts receivable at December 31, 2011. As of December 31, 2011, this customer has shown no indications of default and is current on all outstanding receivables. Refer to Footnote 6 for further disclosures.

Allowance for Uncollectible Receivables

The Company has established a reserve for uncollectible receivables based on a combination of historical data, cash payment trends, specific customer issues, write-off trends, general economic conditions and other factors. The Company charges uncollectible amounts to its allowance based on various issues, including cash payment trends and specific customer issues. These factors are continuously monitored by management to arrive at the estimate for the amount of accounts receivable that may be ultimately uncollectible. The receivables covered in the uncollectible reserve analysis include trade receivables.

RM Resources, LLC

Notes to Financial Statements

December 31, 2011

Property and Equipment

Property and equipment expenditures are recorded at cost. For financial statement purposes, these assets, consisting principally of disposal wells and improvements, are depreciated using the straight-line method over the estimated average lives of 15 years.

Asset Impairment

The Company applies the provisions of the accounting guidance for the impairment or disposal of long-lived assets and assesses whether there has been an impairment of its long-lived assets held and used by the Company when such impairment indicators exist. During the year ended December 31, 2011, the Company identified the potential impairment of one disposal well with a book value of $0.4 million. The Company recognized and impairment charge of $0.3 million for the year ended December 31, 2011 which is included in selling and administrative expense in the statement of operations and transferred $0.1 million of equipment to another disposal well. No other such indicators of impairment existed as of December 31, 2011.

Asset Retirement Obligations

The Company accounts for asset retirement obligations under the accounting guidance for asset retirement obligations and the accounting guidance for conditional asset retirement obligations. This guidance requires the recognition of a liability at fair value for an asset retirement obligation in the period in which it is incurred.

Revenue Recognition

Service revenues presented on the statement of operations consist primarily of water disposal services provided by the Company and sale of skim oil extracted during the filtration phase of the water disposal process. Water disposal revenue is recognized when disposal water is received at the well site. Skim oil revenue is recognized when sold to third party as burned recycle oil.

Income Taxes

The Company is a limited liability company which results in a pass-through for income tax purposes, Therefore, there is no income tax liability as of December 31, 2011.

Service Revenues

The components of service revenues are as follows for the year ended December 31, 2011 (In thousands):


Water revenue	$	7,697
Junk oil revenue		307

	$	8,004

RM Resources, LLC

Notes to Financial Statements

December 31, 2011

3.	New Accounting Pronouncements

Offsetting Assets and Liabilities

In December 2011, the Financial Accounting Standards Board (FASB) issued guidance enhancing disclosures of financial instruments and derivative instruments that are offset in the statement of financial position or subject to enforceable master netting agreements. The guidance is effective for interim and annual reporting periods beginning on or after January 1, 2013. The Company will adopt this guidance as required. It will have no effect on the Company’s results of operations, financial position or cash flows for the year ended December 31, 2012.

Presentation of Comprehensive Income

Accounts Receivable

Accounts receivable consist of the following at December 31, 2011 (In thousands):


Trade accounts receivable	$	2,004
Less: Allowance for doubtful accounts		(15	)

	$	1,989

The activity in the allowance for doubtful accounts for the year ended December 31, 2011 is as follows (In thousands):


Balance at beginning of year	$	—
Adjustment to bad debt expense		15

Balances at end of year	$	15

RM Resources, LLC

Notes to Financial Statements

December 31, 2011

4.	Property and Equipment

Property and equipment consists of the following at December 31 (In thousands):


	2011

Disposal wells and improvements	$	4,621
Accumulated depreciation		(482	)

Property and equipment, net	$	4,139

Depreciation expense was approximately $0.3 million for the year ended December 31, 2011.

5.	Asset Retirement Obligations

Retirement obligations associated with long-lived assets are those for which there is a legal obligation to settle under existing or enacted law, statute, written or oral contract, or by legal construction under the doctrine of promissory estoppels. Retirement obligations are recognized only if the legal obligation exists in connection with or as a result of the permanent retirement, abandonment or sale of a long-lived asset. When the liability is initially recorded, the carrying amount of the related long-lived asset is correspondingly increased. Over time, the liability is accreted to its future value. The corresponding amount capitalized at inception is depreciated over the useful life of the asset. The liability must be revalued each period based on current market prices. Accretion expense was approximately $0.02 million for the year ended December 31 2011, and is recorded in depreciation expense on the statement of operations.

Asset retirement obligations at the Company relate to the costs of future well closings. These costs include equipment, supplies and labor to plug the well and reclaim the property. As of December 31, 2011, the Company has $4.1 million of assets requiring an asset retirement obligation reserve.

The following presents the reconciliation of the asset retirement obligation liability for the year ended December 31, 2011 (In thousands):


Balance at December 31, 2010	$	360
2011 additions		190

Balance at December 31, 2011	$	550

RM Resources, LLC

Notes to Financial Statements

December 31, 2011

6.	Transactions With Related Parties

During the year ended December 31 2011, the Company paid $0.4 million in management fees to Rodne Consulting, LLC (“RC”), which is owned by Dean Rodne, a 33% member in the Company. In addition, the Company owes RC $0.1 million as of December 31, 2011, which is included in accounts payable.

The Company recognized $4.8 million of revenue from Wylie Bice Trucking, LLC (“WBT”), whose owner is also 33% member in RM. Of this total, $1.8 million is included in accounts receivable as of December 31, 2011. The revenue was generated from water disposal services provided by the Company to WBT.

7.	Contingencies

Litigation

The Company is involved in various legal proceedings that have arisen in the ordinary course of business. In the opinion of the Company’s management, all such proceedings are adequately covered by insurance or, if not so covered, should not materially result in any liability which would have a material adverse effect on the financial position, results of operations or cash flows of the Company.

8.	Subsequent Events

On May 7, 2012, the Company's members entered into an asset purchase agreement with QC Environmental Services, Inc. to sell the operating assets and rights of the Company for $31.7 million, plus potential additional consideration of $7.6 million if certain future operating and performance criteria are satisfied. On June 1, 2012, this sale was consummated for an adjusted purchase price of $31.4 million.

EX-99.3 5 d382598dex993.htm UNAUDITED INTERIM FINANCIAL STATEMENTS FOR WYLIE BICE TRUCKING UNAUDITED INTERIM FINANCIAL STATEMENTS FOR WYLIE BICE TRUCKING

Exhibit 99.3

Wylie Bice Trucking, LLC

Unaudited Financial Statements

March 31, 2012

Wylie Bice Trucking, LLC

Index

March 31, 2012


	Page(s)

Financial Statements (unaudited)

Statements of Financial Position		2

Statements of Operations		3

Statements of Cash Flows		4

Notes to Financial Statements		5–8

Wylie Bice Trucking, LLC

Statements of Financial Position

March 31, 2012 and December 31, 2011 (Unaudited)


(in thousands)
	March 31, 2012		December 31, 2011
Assets
Current assets
Cash and cash equivalents	$	1,149	$	1,773
Accounts receivable, net		23,352		28,871
Prepaid expenses		426		194

Total current assets		24,927		30,838

Property and equipment, net		11,943		9,793
Other assets		190		169

Total assets	$	37,060	$	40,800


Liabilities and Member’s Equity
Current liabilities
Current maturities of indebtedness	$	1,088	$	1,124
Current maturities of capital lease obligations		1,439		972
Factoring advances liability		8,890		10,472
Accounts payable		5,390		7,041
Independent owner-operators payable		9,538		13,689
Accrued expenses		387		479

Total current liabilities		26,732		33,777

Long-term indebtedness, less current maturities		3,333		3,187
Capital lease obligations, less current maturities		4,107		2,780

Total liabilities		34,172		39,744

Member’s equity		2,888		1,056

Total liabilities and member’s equity	$	37,060	$	40,800

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Statements of Operations

Three Months Ended March 31, 2012 and 2011 (Unaudited)


(in thousands)	Three Months Ended March 31,
	2012			2011
Operating revenues
Transportation revenues	$	26,999		$	6,558
Service revenues		4,313			1,248

Total operating revenues		31,312			7,806

Operating expenses
Purchased transportation		21,302			4,079
Compensation		1,086			529
Payroll service expense		1,569			290
Fuel, supplies and maintenance		3,372			1,369
Depreciation		461			406
Selling and administrative		123			101
Insurance costs		207			142
Taxes and licenses		39			11
Communication and utilities		49			21

Total operating expenses		28,208			6,948

Operating income		3,104			858

Interest expense		415			107

Interest income		(1	)		—
Other (income) expense		(3	)		4

Net income	$	2,693		$	747

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Statements of Cash Flows

Three Months Ended March 31, 2012 and 2011 (Unaudited)


(in thousands)	Three Months Ended March 31,
	2012			2011
Cash flows from operating activities
Net income	$	2,693		$	747
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation		461			406
Bad debt (recovery) expense		(153	)		24
Changes in assets and liabilities
Accounts receivables		5,673			(1,860	)
Prepaid expenses		(232	)		(44	)
Other assets		(23	)		(6	)
Accounts payable		(1,651	)		752
Independent owner-operators payable		(4,151	)		(186	)
Accrued expenses		(92	)		—

Net cash provided by (used in) operating activities		2,525			(167	)

Cash flows from investing activities
Capital expenditures		(184	)		(560	)

Net cash used in investing activities		(184	)		(560	)

Cash flows from financing activities

Proceeds from issuance of long-term loan obligations		485			—
Principal payments on long-term loan obligations		(374	)		(43	)
Principal payments on capital lease obligations		(633	)		(428	)
Settlements on factoring advance arrangements		(1,582	)		—
Member (draws) contributions		(861	)		1,243

Net cash (used in) provided by financing activities		(2,965	)		772

Net (decrease) increase in cash and cash equivalents		(624	)		45
Cash and cash equivalents
Beginning of period		1,773			530

End of period	$	1,149		$	575

Supplemental disclosure of cash flow information
Cash paid during the period for Interest	$	130		$	113
Supplemental disclosure of noncash flow information
Capital lease obligations and lease residual guarantees		2,427			225

The accompanying notes are an integral part of these financial statements.

Wylie Bice Trucking, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

1.	Nature of Business and Operations

2.	General

The financial statements presented herein have been prepared in conformity with accounting principles generally accepted in the United States of America and should be read in conjunction with the audited 2011 financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of only normal reoccurring adjustments, that are deemed necessary for fair presentation.

3.	Service Revenues

The components of service revenues are as follows for the three months ended March 31 (in thousands):


	2012		2011

Rental revenue	$	109	$	112
Water revenue		1,898		694
Repair shop revenue		737		149
Other revenue		1,569		293

		$4,313	$	1,248

4.	Accounts Receivable

Accounts receivable consisted of the following at (in thousands):


	March 31, 2012			December 31, 2011

Trade accounts receivable	$	18,461		$	26,078
Receivables due from factoring		3,736			2,621
Independent owner-operator receivables		1,302			731
Other receivables		478			281

		23,977			29,711

Less: Allowance for doubtful accounts		(625	)		(840	)

	$	23,352		$	28,871

Wylie Bice Trucking, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

The activity in the allowance for doubtful accounts is as follows (in thousands):


Balance at December 31, 2010	$	—

Adjustment to bad debt expense		(840	)
Write-offs, net of recoveries		—


Balance at December 31, 2011		(840	)

Adjustment to bad debt expense		153
Write-offs, net of recoveries		62


Balance at March 31, 2012 (unaudited)	$	(625	)

Accounts Receivable Factoring

At March 31, 2012 and December 31, 2011, the Company had factored receivables of approximately $3.7 million and $2.6 million, respectively, and a factoring advance liability of approximately $8.9 million and $10.4 million, respectively. As of March 31, 2012 and December 31, 2011, the Company had no outstanding loan balances under this arrangement.

5.	Property and Equipment

Property and equipment consisted of the following at (in thousands):


	March 31, 2012			December 31, 2011

Land and improvements	$	60		$	60
Buildings and improvements		801			801
Other Equipment		1,757			1,657
Trailers, tractors and terminal equipment		11,894			9,383

Total property and equipment		14,512			11,901

Accumulated depreciation		(2,569	)		(2,108	)

Property and equipment, net	$	11,943		$	9,793

Depreciation expense was approximately $0.5 million and $0.4 million for the three month periods ended March 31, 2012 and 2011, respectively.

At March 31, 2012 and December 31, 2011, the Company had approximately $7.5 million and $4.7 million, respectively, of fixed assets and approximately $1.3 million and $1.2 million, respectively, of accumulated depreciation related to equipment under capital leases. Equipment under capital leases is included in trailers, tractors and terminal equipment in the above schedule.

Wylie Bice Trucking, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

6.	Long-Term Indebtedness

Long-term debt consisted of the following (in thousands):


	March 31, 2012			December 31, 2011

Capital lease obligations	$	5,546		$	3,752
Equipment loans		4,421			4,311

Long-term obligations, including current maturities		9,967			8,063

Less: Current maturities of long-term obligations (including capital lease obligations)		(2,527	)		(2,096	)

Long-term obligations, less current maturities (including capital lease obligations)	$	7,440		$	5,967

Equipment Loans

Lease Agreements

The Company entered into multiple capital leases with various lenders for the purchase of tractors, trailers and other equipment. The leases have interest rates ranging from 4.25% to 12.69%. There are no covenants associated with these financing agreements. The Company records these leases under capital lease obligations in the statements of financial position.

7.	Transactions With Related Parties

The Company purchased from RM Resources, LLC (“RM”) a company which is 33% owned by Wylie Bice, the owner of the Company, approximately, $1.2 million and $0.2 million for water disposal services for the three month periods ended March 31, 2012 and 2011, respectively. Of this total, approximately, $0.7 million and $0.04 million was included in accounts payable as of March 31, 2012 and March 31, 2011, respectively. The services purchased from RM by the Company are a passthrough of collections received from customers. The Company records water disposal revenues as service revenues with the corresponding expense in fuel, supplies and maintenance.

In the three month period ended March 31, 2012 and 2011, the Company recognized approximately $0.5 million and $0.3 million, respectively, of revenue for services related to equipment rentals to Red Rock Rentals, LLC (“Red Rock”), which is owned by Dean Rodne, 33% owner of RM Resources.

Wylie Bice Trucking, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

The Company performs payroll services, which includes paying driver wages, on behalf of other owner operators. The Company is subsequently reimbursed by the owner operators for those payments. The Company records the reimbursed payroll within service revenues and records a corresponding expense in payroll service expenses.

8.	Commitments and Contingencies

Litigation

The Company is involved in various legal proceedings that have arisen in the ordinary course of business. In the opinion of the Company’s management, all such proceedings are adequately covered by insurance or, if not so covered, should not materially result in any liability which would have a material adverse effect on the financial position, results of operations or cash flows of the Company.

9.	Subsequent Events

EX-99.4 6 d382598dex994.htm UNAUDITED INTERIM FINANCIAL STATEMENTS FOR RM RESOURCES UNAUDITED INTERIM FINANCIAL STATEMENTS FOR RM RESOURCES

Exhibit 99.4

RM Resources, LLC

Unaudited Financial Statements

March 31, 2012

RM Resources, LLC

Index

March 31, 2012


	Page(s)

Financial Statements (Unaudited)

Statements of Financial Position		2

Statements of Operations		3

Statements of Cash Flows		4

Notes to Financial Statements		5–7

RM Resources, LLC

Statements of Financial Position

March 31, 2012 and December 31, 2011 (Unaudited)


(in thousands)	March 31, 2012		December 31, 2011

Assets
Current assets
Cash and cash equivalents	$	2,220	$	1,605
Accounts receivable, net		1,787		1,989
Other		47		47

Total current assets		4,054		3,641

Property and equipment, net		4,376		4,139
Other assets		121		121

Total assets	$	8,551	$	7,901


Liabilities and Members’ Equity
Current liabilities
Accounts payable	$	719	$	469

Total current liabilities		719		469

Asset retirement obligations		555		550

Total liabilities		1,274		1,019

Members’ Equity		7,277		6,882

Total liabilities and members’ equity	$	8,551	$	7,901

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Statements of Operations

Three Months Ended March 31, 2012 and 2011 (Unaudited)


	Three Months Ended
(in thousands)	March 31,
	2012			2011
Operating revenues
Service revenues	$	1,381		$	1,396

Total operating revenues		1,381			1,396

Operating expenses
Fuel, supplies and maintenance		378			274
Depreciation and amortization		76			42
Selling and administrative		325			248
Insurance costs		18			8
Communication and utilities		35			25

Total operating expenses		832			597

Operating income		549			799

Other income		(1	)		—

Interest expense		5			4

Net income	$	545		$	795

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Statements of Cash Flows

Three Months Ended March 31, 2012 and 2011 (Unaudited)


(in thousands)	Three Months Ended March 31,
	2012			2011
Cash flows from operating activities
Net income	$	545		$	796
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		76			42
Changes in assets and liabilities
Accounts receivables		203			266
Accounts payable		249			172
Asset retirement obligations		5			4

Net cash provided by operating activities		1,078			1,280

Cash flows from investing activities
Capital expenditures		(313	)		(540	)

Net cash used in investing activities		(313	)		(540	)

Cash flows from financing activities
Member distributions		(150	)		(680	)

Net cash used in financing activities		(150	)		(680	)

Net increase in cash and cash equivalents		615			60

Cash and cash equivalents
Beginning of period		1,605			688

End of period	$	2,220		$	748

The accompanying notes are an integral part of these financial statements.

RM Resources, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

1.	Nature of Business and Operations

RM Resources, LLC, located in Medora, North Dakota, (the “Company” or “RM”), operates four salt water injection disposal wells within the Bakken Shale. All four of the wells are considered to be Type II wells in accordance with the Environmental Protection Agency (“EPA”) Title 40 Regulation. Type II wells inject nonhazardous fluids associated with oil and natural gas production. Most of the injected fluid is salt water (brine), which is brought to the surface in the process of producing (extracting) oil and gas. In addition, brine and other fluids are injected to enhance (improve) oil and gas production.

The Company is owned by three members, each with equal interests, rights, preferences and privileges.

2.	General

3.	Service Revenues

The components of service revenues are as follows for the three months ended March 31 (in thousands):


	2012		2011
	(unaudited)
Water revenue	$	1,365	$	1,304
Junk oil revenue		16		92

	$	1,381	$	1,396

4.	Accounts Receivable

Accounts receivable consisted of the following at (in thousands):


	March 31, 2012			December 31, 2011
	(unaudited)
Trade accounts receivable	$	1,802		$	2,004
Less: Allowance for doubtful accounts		(15	)		(15	)

	$	1,787		$	1,989

RM Resources, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

The activity in the allowance for doubtful accounts is as follows (in thousands):


Balance at December 31, 2010		—

Adjustment to bad debt expense		(15	)
Write-offs, net of recoveries		—

Balance at December 31, 2011		(15	)

Adjustment to bad debt expense		—
Write-offs, net of recoveries		—

Balance at March 31, 2012 (unaudited)	$	(15	)

5.	Property and Equipment

Property and equipment consisted of the following at (in thousands):


	March 31, 2012			December 31, 2011
	(unaudited)
Disposal wells and improvements	$	4,934		$	4,621

Accumulated depreciation		(558	)		(482	)

Property and equipment, net	$	4,376		$	4,139

Depreciation expense was approximately $0.08 million and $0.04 million for the three months ended March 31, 2012 and 2011, respectively.

6.	Asset Retirement Obligations

Asset retirement obligations at the Company relate to the costs of future well closings. These costs include equipment, supplies and labor to plug the well and reclaim the property. As of March 31, 2012 and December 31, 2011, the Company has approximately $4.4 million and $4.1 million, respectively, of assets requiring an asset retirement obligation reserve.

The following table presents the rollforward of the asset retirement obligation liability for the three months ended March 31, 2012 (in thousands):


Balance at December 31, 2010		360
2011 additions		190
2011 retirements		—

Balance at December 31, 2011		550

2012 additions		5
2012 retirements		—

Balance at March 31, 2012 (unaudited)	$	555

RM Resources, LLC

Notes to Financial Statements (Unaudited)

March 31, 2012

7.	Transactions With Related Parties

During the three month periods ended March 31, 2012 and 2011, the Company recognized approximately $1.2 million and $0.2 million, respectively, of revenues from Wylie Bice Trucking, LLC (“WBT”), whose owner is also 33% member in RM Resources. Of this total, approximately, $0.7 million and $0.04 million was included in accounts receivable as of March 31, 2012 and March 31, 2011, respectively. The revenue was generated as WBT injected flowback and production water into disposal wells owned by the Company.

During the three months ended March 31, 2012, the Company paid approximately $0.1 million in management fees to Rodne Consulting, LLC (“RC”), which is owned by Dean Rodne, a 33% member in the Company.

8.	Commitments and Contingencies

Litigation

The Company is involved in various legal proceedings that have arisen in the ordinary course of business. In the opinion of the Company’s management, all such proceedings are adequately covered by insurance or, if not so covered, should not materially result in any liability which would have a material adverse effect on the financial position, results of operations or cash flows of the Company.

9.	Subsequent Events

On May 7, 2012, the Company’s members entered into an asset purchase agreement with QC Environmental Services, Inc. to sell the operating assets and rights of the Company for $31.7 million, plus potential additional consideration of $7.6 million if certain future operating and performance criteria are satisfied. On June 1, 2012, this sale was consummated for an adjusted purchase price of $31.4 million.

The North Dakota Industrial Commission (NDIC) Oil & Gas Division issued rule changes to the regulations established over drilling and production of oil which became effective April 1, 2012. In these rule changes, it was noted that rule # 43-02-03-19.5 prohibited the use of a reserve pit on most wells unless the wells drilled above the depth of 5,000 feet or for disposal wells in the Dakota Group formation.

One of RM Resources primary revenue streams is pit disposal water. The prohibition of disposal reserve pits at well sites will reduce the number of barrels being disposed. The Company does not expect a significant decline in disposal revenues as the wells are still viable for disposal of other types of disposal water such as production, chemical, and flow-back water.

EX-99.5 7 d382598dex995.htm UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Exhibit 99.5

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The unaudited pro forma combined financial information for the periods indicated below show the effect of the acquisition of the operating assets of Wylie Bice Trucking, LLC (“Bice”) by Quality Carriers, Inc. (a wholly-owned subsidiary of Quality Distribution, Inc. (“Quality”)), and the acquisition of the operating assets and rights of RM Resources, LLC (“RM”) by QC Environmental Services, Inc. (a wholly-owned subsidiary of Quality). Bice was completed June 1, 2012 and RM was completed June 11, 2012. The combined purchase price, excluding transaction fees and costs, was $52.2 million in cash, $21.3 million of unsecured subordinated promissory notes issued in favor of the owners of Bice and RM, and $7.9 million of Quality Common Stock issued to the owners of Bice and RM. The $52.2 million in cash included additional consideration of $3.2 million for equipment purchased after the definitive asset purchase agreement was signed on May 7, 2012. The unaudited pro forma combined balance sheet presents the financial position of Quality at March 31, 2012, giving effect to the acquisitions of Bice and RM as if they had occurred on such date. The unaudited pro forma combined statements of operations for the three months ended March 31, 2012, and for the year ended December 31, 2011, give effect to the acquisitions of Bice and RM as if they had occurred on January 1, 2011.

The unaudited pro forma combined balance sheet as of March 31, 2012, has been prepared by combining the historical consolidated balance sheet of Quality as of March 31, 2012, with the historical statements of financial position of Bice and RM as of March 31, 2012. The unaudited pro forma combined statement of operations for the year ended December 31, 2011, has been prepared by combining Quality’s historical consolidated statement of operations for the year ended December 31, 2011, with Bice and RM’s statements of operations for its fiscal year ended December 31, 2011. The unaudited pro forma combined statements of operations for the three months ended March 31, 2012, has been prepared by combining Quality’s historical consolidated statement of operations for the three months ended March 31, 2012, with Bice and RM’s historical statements of operations for the three months ended March 31, 2012. Appropriate pro forma adjustments have been applied to the historical accounts.

The unaudited pro forma combined financial information is presented for informational purposes only and it is not necessarily indicative of the financial position and results of operations that would have been achieved had the acquisition been completed as of the dates indicated and is not necessarily indicative of our future financial position or results of operations.

The acquisitions of Bice and RM have been accounted for under the purchase method of accounting in which assets acquired are recorded at their estimated fair values. Goodwill is generated to the extent that the consideration exceeds the fair value of assets acquired. Quality is in the process of determining the purchase price allocation, which will allocate the excess of purchase price over the fair value of the acquired assets to goodwill. Quality has performed a preliminary allocation of the purchase price. Estimates of useful lives and estimated fair values of tangible and amortizable intangible assets will be finalized after Quality reviews all available data including, but not limited to, appraisals and internal assessments. As a result, the final allocation of the excess purchase price over the fair value of the assets acquired could differ from what is presented herein.

The following unaudited pro forma combined financial information should be read in conjunction with the historical consolidated financial statements of Quality, including related notes thereto, which are included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.

Exhibit 99.5

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011

(In 000’s, Except Per Share Amounts)


	Historical Quality Distribution, Inc.			Historical Wylie Bice Trucking, LLC			Historical RM Resources, LLC		Eliminations (1)			Historical Wylie Bice Trucking, LLC and RM Resources, LLC Combined			Pro Forma Adjustments			Unaudited Pro Forma Combined

OPERATING REVENUES:
Transportation	$	517,780		$	88,056		$	—				$	88,056					$	605,836
Service revenue		110,588			14,382			8,004		(4,794	)		17,592						128,180
Fuel surcharge		117,583			—			—		—			—						117,583

Total operating revenues		745,951			102,438			8,004		(4,794	)		105,648						851,599

OPERATING EXPENSES:
Purchased transportation		522,866			73,234			—					73,234						596,100
Compensation		61,098			7,581			—					7,581			(264	) (2)		68,415
Fuel, supplies and maintenance		51,102			11,757			1,675		(4,794	)		8,638						59,740
Depreciation and amortization		14,413			1,213			318					1,531			2,567	(3) (4)		18,511
Selling and administrative		21,647			1,796			1,710					3,506						25,153
Insurance costs		14,042			203			45					248						14,290
Taxes and licenses		2,211			80			—					80						2,291
Communication and utilities		2,732			102			145					247						2,979
Loss (gain) on disposal of PP&E		(1,318	)		—			—					—						(1,318	)
Restructuring (credit) costs		(521	)		—			—					—						(521	)

Total operating expenses		688,272			95,966			3,893		(4,794	)		95,065			2,303			785,640

Operating income		57,679			6,472			4,111					10,583			(2,303	)		65,959

Interest expense		29,497			1,304			16					1,320			2,234	(5)		33,051
Interest income		(585	)		(5	)		—					(5	)					(590	)
Write-off of debt issuance costs		3,181			—			—					—						3,181
Other expense		214			4			—					4						218

Income before income taxes		25,372			5,169			4,095		—			9,264			(4,537	)		30,099
Provision for income taxes		1,941			—			—					—			(347	) (6)		1,594

NET INCOME	$	23,431		$	5,169		$	4,095		—		$	9,264		$	(4,190	)	$	28,505


PER SHARE DATA:
Net income per common share
Basic	$	1.01																$	1.19
Diluted	$	0.96																$	1.13

Weighted average number of shares
Basic		23,088														785	(7)		23,873
Diluted		24,352														785	(7)		25,137

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE

YEAR ENDED DECEMBER 31, 2011

(In 000’s)

(1)	Reflects the elimination of RM revenue and the related Bice operating expenses for services provided by RM to Bice.

(2)	Reflects the decrease in compensation expense to the former owners of Bice and RM of $464, and an increase of $200 based upon a contractual consulting arrangement entered into in connection with the acquisitions.

(3)	Reflects an increase in depreciation expense of $918 due to the estimated increase in the fair value of Bice and RM’s depreciable property and equipment over their historical cost basis. See Note 3 to the Unaudited Pro Forma Combined Balance Sheet as of March 31, 2012.

(4)

Reflects an increase to amortization expense of $1,649 related to the amortization of the estimated fair value of the identifiable intangible assets of Bice and RM resulting from the initial purchase price allocation. These intangible assets are being amortized over their estimated remaining useful lives. See Note 5 to the Unaudited Pro Forma Combined Balance Sheet as of March 31, 2012.

(5)

Reflects an increase in interest expense of $2,234 comprised of: (a) $1,169 related to borrowings of $52,176 under Quality’s asset-based credit facility (the “ABL Facility”), at its current borrowing rate of 2.2%; and (b) $1,065 related to the issuance of $21,300 in unsecured subordinated promissory notes issued to the Bice and RM owners as part of the consideration for the acquisitions at a fixed interest rate of 5.0%. If interest rates were to increase or decrease by 1/8%, pro forma net income for the year ended December 31, 2011 would be $28.411 and $28.589, respectively.

(6)

Reflects the adjustment to the provision for income taxes by applying Quality’s effective tax rate of 7.7% to the pro forma adjustments identified in Notes 1 through 5 above. The use of the effective tax rate was due to Quality’s net operating loss carryforwards. Bice and RM were structured as Limited Liability Companies and therefore, were treated as pass-through entities for U.S federal income tax purposes.

(7)

Reflects the issuance of $7,920 priced at the value of Quality’s Common stock on the closing dates, or 785 shares, issued to the Bice and RM owners as part of the consideration for the acquisitions. The number of shares issued was determined by the average trading price of Quality’s common stock for the thirty consecutive trading days ending on the last trading day preceding the closing dates.

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(In 000’s, Except Per Share Amounts)


	Historical Quality Distribution, Inc.			Historical Wylie Bice Trucking, LLC			Historical RM Resources, LLC			Eliminations (1)			Wylie Bice Trucking, LLC and RM Resources, LLC Combined			Pro Forma Adjustments			Unaudited Pro Forma Combined

OPERATING REVENUES:
Transportation	$	133,206		$	26,999		$	—					$	26,999					$	160,205
Service revenue		27,985			4,313			1,381			(1,178	)		4,516						32,501
Fuel surcharge		30,724			—			—			—			—						30,724

Total operating revenues		191,915			31,312			1,381			(1,178	)		31,515						223,430

OPERATING EXPENSES:
Purchased transportation		131,877			21,302			—						21,302						153,179
Compensation		16,631			2,655			—						2,655			(66	) (2)		19,220
Fuel, supplies and maintenance		14,466			3,372			378			(1,178	)		2,572						17,038
Depreciation and amortization		3,791			461			76						537			642	(3) (4)		4,970
Selling and administrative		6,510			123			325						448						6,958
Insurance costs		3,219			207			18						225						3,444
Taxes and licenses		748			39			—						39						787
Communication and utilities		837			49			35						84						921
Loss (gain) on disposal of PP&E		(2	)		—			—						—						(2	)

Total operating expenses		178,077			28,208			832			(1,178	)		27,862			576			206,515

Operating income		13,838			3,104			549						3,653			(576	)		16,915

Interest expense		7,189			415			5						420			558	(5)		8,167
Interest income		(179	)		(1	)		—						(1	)					(180	)

Other income		(236	)		(3	)		(1	)					(4	)					(240	)

Income before income taxes		7,064			2,693			545			—			3,238			(1,134	)		9,168
Provision for income taxes		364			—			—						—			(58	) (6)		306

NET INCOME	$	6,700		$	2,693		$	545			—		$	3,238		$	(1,076	)	$	8,862


PER SHARE DATA:
Net income per common share
Basic	$	0.27																	$	0.35
Diluted	$	0.26																	$	0.34

Weighted average number of shares
Basic		24,546															785	(7)		25,331
Diluted		25,413															785	(7)		26,198

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

NOTES TO UNAUDITED PRO FORMA COMBINED

STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012

(In 000’s)

(1)	Reflects the elimination of RM revenue and the related Bice operating expenses for services provided by RM to Bice.

(2)	Reflects the decrease in compensation expense to the former owners of Bice and RM of $116, and an increase of $50 based upon a contractual consulting arrangement entered into in connection with the acquisitions.

(3)	Reflects an increase in depreciation expense of $230 due to the estimated increase in the fair value of Bice and RM’s depreciable property and equipment over their historical cost basis. See Note 3 to the Unaudited Pro Forma Combined Balance Sheet as of March 31, 2012.

(4)

Reflects an increase to amortization expense of $412 related to the amortization of the estimated fair value of the identifiable intangible assets of Bice and RM resulting from the initial purchase price allocation. These intangible assets are being amortized over their estimated remaining useful lives. See Note 5 to the Unaudited Pro Forma Combined Balance Sheet as of March 31, 2012.

(5)

Reflects an increase in interest expense of $558 comprised of: (a) $292 related to borrowings of $13,044 under Quality’s ABL Facility, at its current borrowing rate of 2.2%; and (b) $266 related to the issuance of $21,300 in unsecured subordinated promissory notes issued to the Bice and RM owners as part of the consideration for the acquisitions at a fixed interest rate of 5.0%. If interest rates were to increase or decrease by 1/8%, pro forma net income for the three months ended March 31, 2012 would be $8,841 and $8,881, respectively.

(6)

Reflects the adjustment to the provision for income taxes by applying Quality’s effective tax rate of 5.2% to the pro forma adjustments identified in Notes 1 through 5 above. The use of the effective tax rate was due to Quality’s net operating loss carryforwards. Bice and RM were structured as Limited Liability Companies and therefore, were treated as pass-through entities for U.S federal income tax purposes.

(7)

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF MARCH 31, 2012

(In 000's)


	Historical Quality Distribution, Inc.			Historical Wylie Bice Trucking, LLC		Historical RM Resources, LLC		Eliminations (1)			Historical Wylie Bice Trucking, LLC and RM Resources, LLC Combined		Pro Forma Adjustments			Unaudited Pro Forma Combined
ASSETS
Current Assets:
Cash and cash equivalents	$	3,867		$	1,149	$	2,220				$	3,369	$	(3,369	)(2)	$	3,867
Accounts receivable, net		103,427			23,352		1,787		(729	)		24,410		(24,410	)(2)		103,427
Prepaid expenses		12,606			426		—					426		(426	)(2)		12,606
Deferred tax asset		4,074			—		—					—		—			4,074
Other		6,467			—		47					47		(47	)(2)		6,467

Total current assets		130,441			24,927		4,054		(729	)		28,252		(28,252	)		130,441
Property and equipment, net		134,623			11,943		4,376					16,319		9,488	(3)		160,430
Goodwill		31,410			—		—					—		49,524	(4)		80,934
Intangibles, net		18,018			—		—					—		13,420	(5)		31,438
Other assets		16,305			190		121					311		(311	)(2)		16,305

Total assets	$	330,797		$	37,060	$	8,551	$	(729	)	$	44,882		43,869		$	419,548


LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Current maturities of indebtedness	$	3,248		$	9,978	$	—				$	9,978	$	(9,978	)(2)	$	3,248
Current maturities of capital lease obligations		6,425			1,439		—					1,439		(1,439	)(2)		6,425
Accounts payable		10,548			5,390		719		(729	)		5,380		(5,380	)(2)		10,548
Independent affiliates and independent owner-operators payable		12,423			9,538		—					9,538		(9,538	)(2)		12,423
Accrued expenses		30,454			387		—					387		8,913	(2)(6)		39,754
Environmental liabilities		3,911			—		—					—		—			3,911
Accrued loss and damage claims		8,949			—		—					—		—			8,949

Total current liabilities		75,958			26,732		719		(729	)		26,722		(17,422	)		85,258
Long-term indebtedness, less current maturities		273,531			3,333		—					3,333		70,143	(2)(7)		347,007
Capital lease obligations, less current maturities		2,861			4,107		—					4,107		(4,107	)(2)		2,861
Environmental liabilities		5,765			—		—					—		—			5,765
Accrued loss and damage claims		9,745			—		—					—		—			9,745
Other non-current liabilities		30,521			—		555					555		—			31,076

Total liabilities		398,381			34,172		1,274		(729	)		34,717		48,614			481,712

SHARHOLDERS’ EQUITY (DEFICIT)
Common stock		426,799			—		—					—		7,920	(8)		434,719
Treasury stock		(1,944	)		—		—					—		—			(1,944	)
Accumulated equity (deficit)		(271,843	)		2,888		7,277					10,165		(12,665	)(9)		(274,343	)
Stock recapitalization		(189,589	)		—		—					—		—			(189,589	)
Accumulated other comprehensive loss		(31,032	)		—		—					—		—			(31,032	)
Stock purchase warrants		25			—		—					—		—			25

Total shareholders’ equity (deficit)		(67,584	)		2,888		7,277		—			10,165		(4,745	)		(62,164	)

Total liabilities and shareholders' equity (deficit)	$	330,797		$	37,060	$	8,551	$	(729	)	$	44,882	$	43,869		$	419,548

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2012

(In 000’s)

(1)	Reflects the elimination of RM’s accounts receivable and the related Bice accounts payable, for services provided by RM to Bice.

(2)	Reflects the adjustment for non-purchased assets and liabilities consisting of the following:


Cash	$	(3,369	)
Accounts receivable, net		(24,410	)
Prepaid expenses		(426	)
Other short-term assets		(47	)
Other long-term assets		(311	)

Current maturities of indebtedness		9,978
Current maturities of capital lease obligations		1,439
Accounts payable		5,380
Independent owner-operators payable		9,538
Accrued expenses		387
Long-term indebtedness, less current maturities		3,333
Capital lease obligations, less current maturities		4,107

(3)	Reflects the initial allocation of the purchase price to increase the book value of Bice and RM’s property and equipment at March 31, 2012 to fair value pursuant to the preliminary results of an appraisal. The adjustments applied were as follows:


Transportation equipment (remaining useful lives 3-15 years)	$	5,265
Disposal well assets (remaining useful lives 12-15 years)		4,223

	$	9,488

(4)	Reflects the excess of the purchase price of Bice and RM over the fair value of its assets and identifiable intangible assets.

(5)	Reflects the initial allocation of the purchase price to identified intangible assets. The intangible assets and their initial allocated values are as follows:


Non-compete agreements (estimated useful life 6 years)	$	400
Customer relationships (estimated useful life 10 years)		12,320
Trade name (estimated useful life 2 years)		700

	$	13,420

(6)	Reflects the fair value of the estimated additional consideration to be paid to the Bice and RM owners of $6,800 and the estimated transaction costs which are non-recurring and directly associated with the Bice and RM asset acquisitions of $2,500.

(7)	Reflects $52,176 in borrowings under the ABL and the issuance of $21,300 in unsecured subordinated promissory notes to the Bice and RM shareholders, to partially fund the consideration for the assets acquired.

(8)	Reflects the issuance of $7,920 in Quality’s common stock used to partially fund the consideration for the assets acquired.

(9)	Reflects the estimated transaction costs which are non-recurring and directly associated with the Bice and RM asset acquisitions of $2,500, and the elimination of Bice and RM combined accumulated equity of $10,165.

GRAPHIC 8 g382598ex99_1pg003.jpg GRAPHIC begin 644 g382598ex99_1pg003.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$! M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$" M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,# M`P,#`P,#`P,#_\``$0@`2P!C`P$1``(1`0,1`?_$`,X``0`!!0`#`0`````` M```````)!@<("@L!`P4"`0$``@("`P$`````````````!P@&"0,$`04*`A`` M``8!`P,!!0('!Q4``````0(#!`4&!P`1"!(3"2$Q(A05"D$743)2U%46&''B M(R0U)AEA@9$S0U.3-$14)4655K;6=Y!L=%2LN*STS145946H<%"8B-# M@Y/#1)2T=396-QC_V@`,`P$``A$#$0`_`-_C0#0#0#0#0#0#0%@>54C\HXVY MQE!1^(!AC&WN^P!^WW>S#N3]ON=)^CJVVWV';47ZV)>TAS(WAP:J^"<2-I#( MWK5'+]-&[?Q:F;';",QJ1@:J09N)L'\VC>P/]:!^8ZTDI36;3;XN35C\H3O/ M?'G[[B?[M&_VH'YCINW']P?8U?G"=Y[XV".!^="3>,P$Z_^;C* ME5*F"CV=L':^"^`(8X@!^UOW`]G5M]FMI?5DSRDK)F`9!W95(UP]8?("T>:\;S7O2.1E1)9T71PC!DF3&_?XKW-XN,DBU;LJ MV-`-`-`-`-`-`-`-`8KB4Y1^PQ1# M<-1AK5_J/,?]'JO@G$L:$L;,UFRNQZ18N-TB*GZ9IHTA:K+L'^G)'V!_=OWN MM*2+8;VUH**/BF=H\C:K+^G)'_#?O=>1YOHO),[1,IQ`R1?HMA`*1MNG&1XF MCL#1AD'0%%@9V":+D6VY!`@KI.#E-[=P..L&Q'5;4K*50UVLHJ>:D^M=TEYL;]V*MO6VP5$5.1"4+! M^8LP2KQ*Y.D39R.ES&=#.==>EU(I%J+MVHA5?4+(^3L.R5B5= M08;22:R53Q8]K(.:M]J118[8*I+1K>>4L&@&@&@&@&@&@&@,/O((^^6<'N5T MAW4D/@L#Y(<]Y<2E12[5:?'ZU3'$I`3+MN.X@&VHZUJ7&@+O`R$2@[>V2O`Y4,N!P+*1Z0;$4,4GN?$>GNA M_7UCU?@>(T]6Z5)I:GHTA#\F]=J<,#OT]-6S9:/Z*8O(U?8)A.+.1\>,HYB# MR^4QH(4F*3$'-GA4!!0IVW4F(*O2;'#;U#VZ@/-^7 MO038-8VGG1C[/L8>9,7C&'R.HVPCY/@MY+2ZVN$Q`:`:`:`:`:`:`P6\G0";QXJ.6W\-3UF*7X) MMYZF6.'`1&_Q@;)#_%)3T]S_`#%74X]5QZKK3AUO[M5_R[R/\XW_`#!-V\]G MND,WNA#X+\5+^3?R2?I_]S6TZ-OJ_>(1C,WCL^-X_(FZ)K!31N-`-`-`-`0> M^;GA=RSYF8\P%`<4'*+:;HU\MDW<3+9+7QL!H>4K3>.C0*[070&5$'Z9OX(= M^W^-]NHNU0RUF',E#32,OJB3I;WJ[NT;8MV&U41=B\:>JI;7JG:J:;Z6XUC- M9J.U74E91R93?]4M\$J['_`(-O*XWR!0'60BP,_0&=ZIKV\P"=-)QEU'/;3S&89T;V3W2GI M*W]'OP/_`/3/B[_V(QE_RUJQ7V*R?]%8=_#R MO`-9_IJUA_RG,/UA5?&GO)P"X,I%`B?#OC&F0-]B$P;C8I0W'<=BEK8`&XZX MW9$R2];SL(PU7<=-)\`YFZY:SL;=9FS,:-X$Q&K^-/MM.$_#M@`%9<6./30H M)E2`&V'J`B`)E_%3`$X$NQ"[>@>S7`[3O(+^?@N%+RTLCP#\/UNUDF<_->8E MY<1JU_:GUV7$;BO'."NX_CA@UDZ(!RD<-,64ENN0IRB4Y2JI0I3@!RCL/KZA MKO85D[*>!5S<2P7#*"DQ%B*C9LF1*ES&HY(.1'L:CD1R6+!;4L4Z\[6/5JIE MK*J,S8\^4NU'5]4J6;+%FP/N_LV\>NGI^X[$O3T=OI^[VJ[='<[O1M\JVZ>[ M[VWLZO7VZRS>JGRC^VIT?2?J1&/G_&(QC\LJ-L(1\9P69FH>NQ4A.V"6 MC(*$B&;F1E9F9?M8R*C(]FB=P[?2$B]50:,F;5!,QU%5#E(0A1$P@`".NN8* M4&PS=A>5I,EDN,R[C"1QQ#.3LYC(#"_51Y28IVF9H11K)6MO+*03%R0\@@`D M57(8!73`0]\NX%0TJ_T/),-^L6.KM4;]7_BE6/SVE62&M,-\:@5,Z[3YG!O7 MS+XI$BQ!.GU]90,`B'J&@*K.HFGL*BA$P'T`3F*7?]SJ$-]`?HIBF`#%,!BC M[#%$!`?L]!#T'UT!ZR+HJ#TD62.;\!%"&'^P`B.@*!<9=Q0TO+;%[O)^/&N2 MWA"*-,>.+K6T;RZ35:J/DU&U24DBSZY%&21UBB5N("D43A[H".@*NFYV$K,1 M(V"R3$57X&'9KR$M-S<@TB8B+8-4S+.7TC)/UF[-DS;)$$RBJIRD(4!$1`-` M6LJG)#CO?)QI6:/GK"]SLC_N_`5^J92H]BG'O814<+_"1,1.O'[GLMTC*'Z$ MS=)"B8?0!'0%Z-`-`-`-`9[3.-2OERCF>1%I MZO0=!8P4]&P!(&*K(7BS5]G3\S-Q+0\:19T MP*DH1H15V]3(@F30$=WBC\E^??%3RXK>0J3(6"6H3NQ#5,XX12L3]E599LQ4&V9@BIG)\M<(M2DJR5T=Q#N+BXE_D6Z1B!I%JP;'<*,@8I'42` M`1`A2%*!,O;O+,[X#_3%\'\,X]LCQYRQYBXSS=2:>Y1EG8V.A8M5R_E2'R#E M?XPH.GK:2;)NTH>$ZE$%!>.E'+=3>..70$5'TF-HLTKYEL4-)2R6"1:&P]GD MYFCZ9D';10Y*`^$AE&[APHDWV6_E%,PF;Q]`K4$X?J@7-OSH<]*KB0V5;@RIF<\V5C&N!L&KVR1C,3T5K8G<=2H&0+>.\5O*;"&"<"CEBWME.-6/KG9\L.HZ M22/).J#"LR(U^)3)$M`;Q:3EVLP25*51PJ8_4('2]\)MGY/7'Q M;\/;!S#;61MGQYC=RA937-!\VNCVO1UIL$;CF4N2,JNXEBVN6QTTBG,@+SH= MG=*G,LFFH)B%`E/T`T`T!SE_K?O_`"-X'_\`1/+7_'5=T!([]+IRLP!P]\'N M7M7$M/V!_TMF#5/WG" MYM@$"@8Q0-$3`&)LA^1KR(5&@T6ND"V\GN2CN;?,Z76FC"'J<3=+RZM-OGHZ MM%=H14'5Z7!NW3P&IW*31JT;`D*I2`!M`;-7ULK;X+EOPE9`?N?"<7[`V[G3 MT=SL9,EDNOHW,!>KHWVW';0$=OB7X(7_`,@6+.5G*[D",E/\K-2J&**Z9B@1*/)T2)+'ILUDJ"4K:]Y:M'+)\SD).KQJZR[-NL3 MM&="F0NWD'Y[81R:M:,A.;')(Y+QK6LU M41PYC\J%\WOB7L^!8WD9)/<1358R/=/H"P76OK9/KTK(PK&;7J;_&3!Q)WA M6R1Q'I4%T&;)RF+DAB)J'VWT!F/PQY@X;YY\=:1REP`YLC[$N17UU9U)_;(! M6L34BC1KS8Z!(R*D&X77=L6,A+UA=9H"_;7.T.F95))0QDR`92:`:`:`YS'U MOY3!R+X''$H]!L*9<*4VP](F+>JV)B@;V")0.&X?9N'X=`6\\`_T\O##RD\& M)ODEGF\9WJ]\C,\V[&;1EC:R5**K/R*GUZC3B+APPGZ98W3F3DE[2LFY-WR$ M!)-/MD(;J,8#=@\=_AOX&>,-&6DN,6*EVV1+'$-H&RY>O6#+'+6]LVLJW>O8F MK8P@Y%JW=']XRS=9)R7V%.4-`;.W&3C/A;A[@ZA<.#G4$!67-TE(3I*`%^=`-`-`<=SZA;I M_I,.1G>_:R[GWNY*ZOVK.[\!M\[:]/W%_`_Q;[HNG;Y1T^ORKX+?WM]`2P?1 MY]C]M97;]I?K_4#+W1\H^8?LH[_*JIU?K)U?P'WE]/\`B_<].WV]O>VT!TP] 2`-`-`-`-`-`-`-`-`-`-`?_9 ` end GRAPHIC 9 g382598ex99_2pg003.jpg GRAPHIC begin 644 g382598ex99_2pg003.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$! M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$" M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,# M`P,#`P,#`P,#_\``$0@`2P!C`P$1``(1`0,1`?_$`,X``0`!!0`#`0`````` M```````)!@<("@L!`P4"`0$``@("`P$`````````````!P@&"0,$`04*`A`` M``8!`P,!!0('!Q4``````0(#!`4&!P`1"!(3"2$Q(A05"D$743)2U%46&''B M(R0U)AEA@9$S0U.3-$14)4655K;6=Y!L=%2LN*STS145946H<%"8B-# M@Y/#1)2T=396-QC_V@`,`P$``A$#$0`_`-_C0#0#0#0#0#0#0%@>54C\HXVY MQE!1^(!AC&WN^P!^WW>S#N3]ON=)^CJVVWV';47ZV)>TAS(WAP:J^"<2-I#( MWK5'+]-&[?Q:F;';",QJ1@:J09N)L'\VC>P/]:!^8ZTDI36;3;XN35C\H3O/ M?'G[[B?[M&_VH'YCINW']P?8U?G"=Y[XV".!^="3>,P$Z_^;C* ME5*F"CV=L':^"^`(8X@!^UOW`]G5M]FMI?5DSRDK)F`9!W95(UP]8?("T>:\;S7O2.1E1)9T71PC!DF3&_?XKW-XN,DBU;LJ MV-`-`-`-`-`-`-`-`8KB4Y1^PQ1# M<-1AK5_J/,?]'JO@G$L:$L;,UFRNQZ18N-TB*GZ9IHTA:K+L'^G)'V!_=OWN MM*2+8;VUH**/BF=H\C:K+^G)'_#?O=>1YOHO),[1,IQ`R1?HMA`*1MNG&1XF MCL#1AD'0%%@9V":+D6VY!`@KI.#E-[=P..L&Q'5;4K*50UVLHJ>:D^M=TEYL;]V*MO6VP5$5.1"4+! M^8LP2KQ*Y.D39R.ES&=#.==>EU(I%J+MVHA5?4+(^3L.R5B5= M08;22:R53Q8]K(.:M]J118[8*I+1K>>4L&@&@&@&@&@&@&@,/O((^^6<'N5T MAW4D/@L#Y(<]Y<2E12[5:?'ZU3'$I`3+MN.X@&VHZUJ7&@+O`R$2@[>V2O`Y4,N!P+*1Z0;$4,4GN?$>GNA M_7UCU?@>(T]6Z5)I:GHTA#\F]=J<,#OT]-6S9:/Z*8O(U?8)A.+.1\>,HYB# MR^4QH(4F*3$'-GA4!!0IVW4F(*O2;'#;U#VZ@/-^7 MO038-8VGG1C[/L8>9,7C&'R.HVPCY/@MY+2ZVN$Q`:`:`:`:`:`:`P6\G0";QXJ.6W\-3UF*7X) MMYZF6.'`1&_Q@;)#_%)3T]S_`#%74X]5QZKK3AUO[M5_R[R/\XW_`#!-V\]G MND,WNA#X+\5+^3?R2?I_]S6TZ-OJ_>(1C,WCL^-X_(FZ)K!31N-`-`-`-`0> M^;GA=RSYF8\P%`<4'*+:;HU\MDW<3+9+7QL!H>4K3>.C0*[070&5$'Z9OX(= M^W^-]NHNU0RUF',E#32,OJB3I;WJ[NT;8MV&U41=B\:>JI;7JG:J:;Z6XUC- M9J.U74E91R93?]4M\$J['_`(-O*XWR!0'60BP,_0&=ZIKV\P"=-)QEU'/;3S&89T;V3W2GI M*W]'OP/_`/3/B[_V(QE_RUJQ7V*R?]%8=_#R MO`-9_IJUA_RG,/UA5?&GO)P"X,I%`B?#OC&F0-]B$P;C8I0W'<=BEK8`&XZX MW9$R2];SL(PU7<=-)\`YFZY:SL;=9FS,:-X$Q&K^-/MM.$_#M@`%9<6./30H M)E2`&V'J`B`)E_%3`$X$NQ"[>@>S7`[3O(+^?@N%+RTLCP#\/UNUDF<_->8E MY<1JU_:GUV7$;BO'."NX_CA@UDZ(!RD<-,64ENN0IRB4Y2JI0I3@!RCL/KZA MKO85D[*>!5S<2P7#*"DQ%B*C9LF1*ES&HY(.1'L:CD1R6+!;4L4Z\[6/5JIE MK*J,S8\^4NU'5]4J6;+%FP/N_LV\>NGI^X[$O3T=OI^[VJ[='<[O1M\JVZ>[ M[VWLZO7VZRS>JGRC^VIT?2?J1&/G_&(QC\LJ-L(1\9P69FH>NQ4A.V"6 MC(*$B&;F1E9F9?M8R*C(]FB=P[?2$B]50:,F;5!,QU%5#E(0A1$P@`".NN8* M4&PS=A>5I,EDN,R[C"1QQ#.3LYC(#"_51Y28IVF9H11K)6MO+*03%R0\@@`D M57(8!73`0]\NX%0TJ_T/),-^L6.KM4;]7_BE6/SVE62&M,-\:@5,Z[3YG!O7 MS+XI$BQ!.GU]90,`B'J&@*K.HFGL*BA$P'T`3F*7?]SJ$-]`?HIBF`#%,!BC M[#%$!`?L]!#T'UT!ZR+HJ#TD62.;\!%"&'^P`B.@*!<9=Q0TO+;%[O)^/&N2 MWA"*-,>.+K6T;RZ35:J/DU&U24DBSZY%&21UBB5N("D43A[H".@*NFYV$K,1 M(V"R3$57X&'9KR$M-S<@TB8B+8-4S+.7TC)/UF[-DS;)$$RBJIRD(4!$1`-` M6LJG)#CO?)QI6:/GK"]SLC_N_`5^J92H]BG'O814<+_"1,1.O'[GLMTC*'Z$ MS=)"B8?0!'0%Z-`-`-`-`9[3.-2OERCF>1%I MZO0=!8P4]&P!(&*K(7BS5]G3\S-Q+0\:19T MP*DH1H15V]3(@F30$=WBC\E^??%3RXK>0J3(6"6H3NQ#5,XX12L3]E599LQ4&V9@BIG)\M<(M2DJR5T=Q#N+BXE_D6Z1B!I%JP;'<*,@8I'42` M`1`A2%*!,O;O+,[X#_3%\'\,X]LCQYRQYBXSS=2:>Y1EG8V.A8M5R_E2'R#E M?XPH.GK:2;)NTH>$ZE$%!>.E'+=3>..70$5'TF-HLTKYEL4-)2R6"1:&P]GD MYFCZ9D';10Y*`^$AE&[APHDWV6_E%,PF;Q]`K4$X?J@7-OSH<]*KB0V5;@RIF<\V5C&N!L&KVR1C,3T5K8G<=2H&0+>.\5O*;"&"<"CEBWME.-6/KG9\L.HZ M22/).J#"LR(U^)3)$M`;Q:3EVLP25*51PJ8_4('2]\)MGY/7'Q M;\/;!S#;61MGQYC=RA937-!\VNCVO1UIL$;CF4N2,JNXEBVN6QTTBG,@+SH= MG=*G,LFFH)B%`E/T`T`T!SE_K?O_`"-X'_\`1/+7_'5=T!([]+IRLP!P]\'N M7M7$M/V!_TMF#5/WG" MYM@$"@8Q0-$3`&)LA^1KR(5&@T6ND"V\GN2CN;?,Z76FC"'J<3=+RZM-OGHZ MM%=H14'5Z7!NW3P&IW*31JT;`D*I2`!M`;-7ULK;X+EOPE9`?N?"<7[`V[G3 MT=SL9,EDNOHW,!>KHWVW';0$=OB7X(7_`,@6+.5G*[D",E/\K-2J&**Z9B@1*/)T2)+'ILUDJ"4K:]Y:M'+)\SD).KQJZR[-NL3 MM&="F0NWD'Y[81R:M:,A.;')(Y+QK6LU M41PYC\J%\WOB7L^!8WD9)/<1358R/=/H"P76OK9/KTK(PK&;7J;_&3!Q)WA M6R1Q'I4%T&;)RF+DAB)J'VWT!F/PQY@X;YY\=:1REP`YLC[$N17UU9U)_;(! M6L34BC1KS8Z!(R*D&X77=L6,A+UA=9H"_;7.T.F95))0QDR`92:`:`:`YS'U MOY3!R+X''$H]!L*9<*4VP](F+>JV)B@;V")0.&X?9N'X=`6\\`_T\O##RD\& M)ODEGF\9WJ]\C,\V[&;1EC:R5**K/R*GUZC3B+APPGZ98W3F3DE[2LFY-WR$ M!)-/MD(;J,8#=@\=_AOX&>,-&6DN,6*EVV1+'$-H&RY>O6#+'+6]LVLJW>O8F MK8P@Y%JW=']XRS=9)R7V%.4-`;.W&3C/A;A[@ZA<.#G4$!67-TE(3I*`%^=`-`-`<=SZA;I M_I,.1G>_:R[GWNY*ZOVK.[\!M\[:]/W%_`_Q;[HNG;Y1T^ORKX+?WM]`2P?1 MY]C]M97;]I?K_4#+W1\H^8?LH[_*JIU?K)U?P'WE]/\`B_<].WV]O>VT!TP] 2`-`-`-`-`-`-`-`-`-`-`?_9 ` end