ITEM 10. | ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Directors The following persons currently serve as members of the Board of Directors. Directors have been elected to serve until the next annual meeting of stockholders, their earlier resignation or their successors are duly elected and qualified. Information relating to Mr. Pierce is set forth above under Part I – Item I – Executive Officers of the Registrant. Nominee | | Age | | Current Position with Swisher Hygiene | | Director Since | | | | | | | | | | Joseph Burke | | | 58 | | Director | | | 2014 | | Richard L. Handley | | | 68 | | Chairman of the Board | | | 2012 | | William M. Pierce | | | 64 | | Director, President and Chief Executive Officer | | | 2013 | | William D. Pruitt | | | 75 | | Director | | | 2011 | | David Prussky | | | 58 | | Director | | | 2010 | (1) |
___________ (1) | On November 2, 2010, Swisher International, Inc. completed a merger with Swisher Hygiene (formerly CoolBrands International, Inc. (“CoolBrands”)) (the “Merger”). Mr. Prussky served an initial term as a director of CoolBrands from 1994 to 1998 and rejoined the CoolBrands board of directors in February 2010 |
Joseph Burke Mr. Burke has served as a director of Swisher Hygiene since May 2014. Mr. Burke has served as a Management Consultant - Finance and Operations for Hudson Capital Group since March 2013. Mr. Burke served as a Management Consultant - Finance and Operations for Boston Finance Group, LLC from February 2011 to May 2012. Mr. Burke served as Chief Executive Officer of Lakeland Construction Finance, LLC from 2005 to 2007 and as Executive Vice President in 2008. Beginning in 1995, Mr. Burke spent ten years with Gateway, Inc. (NYSE: GTW), a worldwide technology pioneer, serving in a number of executive capacities including Chief Executive Officer - Gateway Country (Retail Division), Senior Vice President - Global Business Development, Chief Financial Officer and most recently as Senior Vice President - Business Development. Mr. Burke has been a director of Flagship Community Bank since its founding in 2005 and is the Chairman of the Asset and Liability and Technology Committees. Mr. Burke was a director of Sunair Services Corporation (AMEX: SNR) from 2006 to 2008 and was a member of the Audit Committee. Mr. Burke earned a BA from the University of Florida. Mr. Burke is an experienced officer and director of public and private companies with the skills necessary to serve as a director. Mr. Burke also has extensive experience in financial matters as a currently licensed certified public accountant, in good standing, and as a former Audit Supervisor of an international accounting firm. Richard L. Handley Mr. Handley has served as the Chairman of Swisher Hygiene since June 5, 2013 and as a director of Swisher Hygiene since December 2012. Mr. Handley served as a director of Swisher International, Inc., the Company's predecessor, from 2005 to 2010. Mr. Handley has served as the Senior Vice President, Secretary and General Counsel of Huizenga Holdings, Inc. since May 1997. From May 1997 to December 2004, Mr. Handley also served as Senior Vice President, Secretary, and General Counsel of Boca Resorts, Inc. From October 1995 to May 1997, Mr. Handley served as Senior Vice President and General Counsel of AutoNation Inc. and its predecessor, Republic Industries Inc. Mr. Handley served as a director of Services Acquisition Corp. International from June 2006 to November 2006. Mr. Handley also serves on the board of certain privately held companies and certain not for profit entities. Mr. Handley earned a BA from the University of California, Berkeley, a JD from the University of Utah College of Law, and an LLM from Georgetown University. Mr. Handley is an experienced officer and director of public and private companies with the skills necessary to serve as a director. As an executive officer and director, Mr. Handley has developed knowledge and experience of financial, operational, and managerial matters. He has helped guide numerous public and private companies from early stage development to significant operating entities. William D. Pruitt Mr. Pruitt has served as a director of Swisher Hygiene since January 2011. Mr. Pruitt has served as general manager of Pruitt Enterprises, LP. and president of Pruitt Ventures, Inc. since 2000. Mr. Pruitt served as an independent board member of the MAKO Surgical Corp., a developer of robots for knee and hip surgery, from 2008 to 2013, when it was sold to Stryker Corp., and served as a member of the MAKO Audit Committee. Mr. Pruitt has been an independent board member of NV5 Holdings, Inc., a professional services company, and is a member of the NV5 Audit Committee, since April 2013. Mr. Pruitt served as an independent board member of The information required by Item 10PBSJ Corporation, an international professional services firm, from 2005 to 2010. Mr. Pruitt served as chairman of the Audit Committee of KOS Pharmaceuticals, Inc., a fully integrated specialty pharmaceutical company, from 2004 until its sale in 2006. He was also chairman of the Audit Committee for Adjoined Consulting, Inc., a full-service management consulting firm, from 2000 until it was merged into Kanbay International, a global consulting firm, in 2006. From 1980 to 1999, Mr. Pruitt served as the managing partner for the Florida, Caribbean and Venezuela operations of the independent auditing firm of Arthur Andersen LLP. Mr. Pruitt holds a Bachelor of Business Administration from the University of Miami and is incorporated by referencea Certified Public Accountant, in good standing. Mr. Pruitt is an experienced director of public companies with the skills necessary to serve as a director. Mr. Pruitt also has extensive experience in financial matters as a certified public accountant and as a former managing partner of an accounting firm. M. David Prussky Mr. Prussky was a director and chair of the Audit Committee of CoolBrands. He was an original director of the predecessor to CoolBrands, Yogen Fruz World-Wide Inc. Mr. Prussky served as an investment banker for Patica Securities Limited from August 2002 to January 2012. Mr. Prussky has served as director of numerous public and private companies over the past 18 years, including Carfinco Income Fund, Canada's largest public specialty auto finance business, and Lonestar West Inc., a hydro-vac service business based in Sylvan Lake, Alberta. Mr. Prussky is also a director and chairman of the Audit Committee of Atrium Mortgage Investment Corporation and Chairman of Griffin Skype Corporation. Mr. Prussky is an experienced director of public companies with the skills necessary to serve as director. He has helped build numerous public and private entities from the early stages to significant operating entities. Executive Officers Information relating to our Proxy Statement for our 2015 Annual Meeting of Stockholders, except for certain information concerning theexecutive officers is set forth above under Part I – Item I – Executive Officers of the CompanyRegistrant. Corporate Governance Principles and Code of Ethics The Board of Directors is committed to sound corporate governance principles and practices. The Board of Directors’ core principles of corporate governance are set forth in Part I — Item I hereofthe Swisher Hygiene Corporate Governance Principles (the “Principles”). In order to clearly set forth our commitment to conduct our operations in accordance with our high standards of business ethics and applicable laws and regulations, the Board of Directors adopted a Code of Business Conduct and Ethics (“Code of Ethics”) which is applicable to all directors, officers, and employees. We intend to post amendments to or waivers from our Code of Ethics (to the extent applicable to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, or persons performing similar functions) on our website at www.swshinvestors.com. A copy of the Code of Ethics and the Principles are available on our corporate website at www.swshinvestors.com. You also may obtain a printed copy of the Code of Ethics and Principles by sending a written request to: Investor Relations, Swisher Hygiene Inc., c/o Akerman LLP, Suite 1600, 350 East Las Olas Boulevard, Fort Lauderdale, Florida 33301. Audit Committee The Company has a separately designated standing Audit Committee established in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its responsibilities by overseeing our accounting and financial processes and the audits of our financial statements. The independent auditor is ultimately accountable to the Audit Committee, as representatives of the stockholders. The Audit Committee has the ultimate authority and direct responsibility for the selection, appointment, compensation, retention and oversight of the work of the company's independent auditor that is engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the company (including the resolution of disagreements between management and the independent auditors regarding financial reporting), and the independent auditor must report directly to the Audit Committee. The Audit Committee also is responsible for the review of proposed transactions between the company and related parties. For a complete description of our Audit Committee's responsibilities, you should refer to the Audit Committee Charter which is available on our corporate website at www.swshinvestors.com. The Audit Committee consists of three (3) directors, Mr. Pruitt, Chairman, Mr. Burke and Mr. Prussky. The Board of Directors has determined that the Audit Committee members have the requisite independence and other qualifications for audit committee membership under applicable rules under the caption “Executive OfficersExchange Act and NASDAQ rules. The Board of Directors also has determined that Mr. Pruitt is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K under the Exchange Act. The Audit Committee held six meetings during 2015. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Registrant.” Our Proxy Statement forExchange Act requires that our directors, executive officers, and persons who beneficially own 10% or more of our stock file with the SEC initial reports of ownership and reports of changes in ownership of our stock and our other equity securities. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the year ended December 31, 2015, Annual Meetingour directors, executive officers, and greater than 10% beneficial owners complied with all such applicable filing requirements, except each of Stockholders will beMessrs. Pierce, Handley, Burke, Pruitt and Prussky untimely reported one transaction on a Form 5, filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Form 10-K.SEC on February 16, 2016. ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth certain summary information concerning compensation earned by, and paid to, the named executive officers for 2015 and 2014. All historical share amounts and computations using such amounts have been retroactively adjusted to reflect the June 3, 2014 one-for-ten reverse stock split. Name and Principal Position | Year | | Salary | | | Bonus | | | Stock Awards | | | Option Awards (1) | | | Nonequity Incentive Plan Compensation | | | Nonqualified Deferred Compensation Earnings | | | All Other Compensation | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | William M. Pierce | 2015 | | $ | 416,805 | | | | - | | | $ | - | | | $ | - | | | | - | | | $ | - | | | $ | 89,717 | (2) | | $ | 506,522 | | President and Chief Executive Officer (6) | 2014 | | | 150,000 | | | | - | | | | - | | | | 44,235 | | | | - | | | | - | | | | 61,836 | (3) | | | 256,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | William T. Nanovsky | 2015 | | $ | 282,796 | | | | - | | | $ | - | | | $ | - | | | | - | | | $ | - | | | $ | 97,065 | (4) | | | 379,861 | | Senior Vice President and Chief Financial Officer (7) | 2014 | | | 270,000 | | | | - | | | | - | | | | 26,541 | | | | - | | | | - | | | | 81,594 | (5) | | | 378,135 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Blake W. Thompson | 2015 | | | 232,692 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 232,692 | | Senior Vice President and Chief Operating Officer (8) | 2014 | | | 275,000 | | | | - | | | | - | | | | 29,490 | | | | - | | | | - | | | | - | | | | 304,490 | |
ITEM 11.(1) | EXECUTIVE COMPENSATION.Represents stock options granted under the Stock Incentive Plan. Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. In determining the grant date fair value for 2014 stock options, we used the Black-Scholes option pricing model, and took into account the $4.04 closing price of our common stock on the date previous to the grant, the $4.04 exercise price, the six year assumed period over which the stock options will be outstanding, a 32.7% volatility rate, and a 1.9% - 2.0% risk free rate. | (2) | Includes (i) $40,628 for expenses related to use of a corporate apartment, (ii) $33,041 for expenses related to travel between North Carolina and Florida and (iii) $16,048 of unused time off. This table does not include the cash payment of $6,897 paid to Mr. Pierce on January 15, 2016 in connection with the cancellation of 6,569 restricted stock units on November 5, 2016. | (3) | Includes (i) $36,388 for expenses related to use of a corporate apartment and (ii) $25,448 for expenses related to travel between North Carolina and Florida. | (4) | Includes (i) $30,962 of fees paid to the SCA Group pursuant to the Executive Services Agreement, (ii) $29,550 for expenses related to use of a corporate apartment, (iii) $30,568 for expenses related to travel between North Carolina and Florida, (iv) $1,250 in phone allowance and (v) $6,231 of unused paid time off. For a discussion of the Executive Services Agreement, see the “Related Party Transactions” section. | (5) | Includes (i) $30,000 of fees paid to the SCA Group pursuant to the Executive Services Agreement, (ii) the $2,949 grant date fair value of a warrant to purchase 2,000 shares of common stock at an exercise price of $4.04 granted to the SCA Group (iii) $28,600 for expenses related to use of a corporate apartment, (iv) $18,545 for expenses related to travel between North Carolina and Florida and (v) $1,500 in phone allowance. For a discussion of the Executive Services Agreement, see the “Related Party Transactions” section. | (6) | Mr. Pierce was appointed as President and Chief Executive Officer of the Company on September 10, 2013. | (7) | Mr. Nanovsky has served as Interim Senior Vice President and Chief Financial Officer or Senior Vice President and Chief Financial Officer of the Company since September 24, 2012. | (8) | Mr. Thompson was appointed Senior Vice President and Chief Operating Officer of the Company on August 9, 2013. In connection with the Sale Transaction, Mr. Thompson resigned as Senior Vice President and Chief Operating Officer, effective November 2, 2015. |
Outstanding Equity Awards at Fiscal Year-End - 2015 The following table sets forth certain information requiredregarding equity-based awards held by Item 11the named executive officers as of December 31, 2015. All historical share amounts and computations using such amounts have been retroactively adjusted to reflect the June 3, 2014 one-for-ten reverse stock split. | | Option Awards (1) | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options Exercisable | | | Number of Securities Underlying Unexercised Options Unexercisable | | Option Grant Date | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | | | Market Value of Shares or Units of Stock That Have Not Vested | | | | | | | | | | | | | | | | | | | | William M. Pierce | | | 30,000 | | | | - | | 8/8/2014 | | $ | 4.04 | | 8/7/2024 | | | - | | | $ | - | | William T. Nanovsky (2) | | | 18,000 | | | | - | | 8/8/2014 | | $ | 4.04 | | 8/7/2024 | | | - | | | $ | - | | | | | 13,500 | | | | - | | 6/11/2013 | | $ | 9.30 | | 6/10/2023 | | | - | | | $ | - | | Blake W. Thompson | | | 20,000 | | | | - | | 8/8/2014 | | $ | 4.04 | | 8/7/2024 | | | - | | | $ | - | | | | | 29,527 | | | | - | | 6/26/2012 | | $ | 25.40 | | 6/25/2022 | | | - | | | $ | - | | | | | 15,000 | | | | - | | 8/15/2013 | | $ | 8.10 | | 8/14/2023 | | | - | | | $ | - | |
______________ (1) | Represents stock options granted under the Stock Incentive Plan, which originally vested in four annual installments starting on the first anniversary of the grant date. In connection with the Sale Transaction, all outstanding options vested on November 1, 2015 and were subsequently cancelled on February 2, 2016. | (2) | Does not include warrants to purchase 2,000 shares of common stock with an exercise price of $4.04 and 1,500 shares of common stock with an exercise price of $9.30 granted to the SCA Group. In connection with the Sale Transaction, these warrants and options vested on November 1, 2015 and were subsequently cancelled on February 2, 2016. |
Employment Agreements We entered into an employment agreement with Mr. Pierce, and we entered into an Executive Services Agreement with the SCA Group in connection with Mr. Nanovsky's service as Senior Vice President and Chief Financial Officer. Below is incorporateda summary of the employment agreement with Mr. Pierce. For a description of the Executive Services Agreement, see the “Related Party Transactions” section. Employment Agreement - William M. Pierce On October 16, 2013, the Company entered into an employment agreement with William M. Pierce, effective as of September 16, 2013 (the “Pierce Agreement”), relating to his service as Chief Executive Officer of the Company. The Pierce Agreement has a term of one year and may be renewed annually upon the consent of both Mr. Pierce and the Company. Also, the Pierce Agreement may be terminated at any time by referencethe Company or Mr. Pierce, provided the terminating party gives the other party written notice of such termination at least 30 days in advance. Pursuant to our Proxy Statementthe Pierce Agreement, Mr. Pierce is to receive an annual base salary in the amount of $150,000 payable in regular installments in accordance with the Company's general payroll practices. Mr. Pierce is also eligible to earn an annual bonus in an amount determined by the Compensation Committee of the Board, based upon achieving performance metrics and strategic goals established by the Board. In addition, the Company will reimburse Mr. Pierce for ourany reasonable out-of-pocket business expenses incurred in connection with his performance as Chief Executive Officer. The Company will also reimburse Mr. Pierce for the costs associated with the lease of an apartment in Charlotte, North Carolina and for the cost of weekly, round-trip air travel between Charlotte, North Carolina and Fort Lauderdale, Florida. On August 8, 2014, the Company entered into an agreement for Renewal and Amendment to the Pierce Agreement with William M. Pierce (the “Pierce Renewal Agreement”). The Pierce Renewal Agreement provided that the term of the Pierce Agreement was renewed and continued to September 16, 2015 Annual Meetingunless earlier terminated. In addition to the weekly air travel of Stockholders,Mr. Pierce between Charlotte, North Carolina and Fort Lauderdale, Florida, the Company shall reimburse Mr. Pierce for the cost of one trip monthly, round-trip air travel, for Executive's spouse to and from Fort Lauderdale, Florida and Charlotte, North Carolina. On November 3, 2014, the Board of Directors approved a salary increase for Mr. Pierce bringing his annual salary to $400,000 effective January 1, 2015, bringing his salary in line with market rates. All other terms and conditions of the Pierce Agreement remained unchanged. Since September 15, 2015, Mr. Pierce has continued to serve as President and Chief Executive Officer of the Company on a month to month basis under the same terms as the Pierce Agreement, subject to further review and discussion of the Board of Directors. On February 19, 2016, the Company entered into a Seperation Agreement and Release with Mr. Pierce. Please see below Severance Agreement – William M. Pierce for additional information. If Mr. Pierce's employment is terminated under the Pierce Agreement by (i) the Company without Cause (as defined in the Pierce Agreement) or (ii) Mr. Pierce for Good Reason (as defined in the Pierce Agreement), then (A) the Pierce Agreement will be deemed to have terminated as of the date Mr. Pierce ceases to be employed by the Company, (B) Mr. Pierce will be entitled to continue to receive his then base salary from the Company for the remainder of the term (which, in the case of base salary, will be paid in arrears in accordance with the Company's general payroll practices, over the applicable period commencing on the date of such termination and subject to withholding and other appropriate deductions), (C) Mr. Pierce shall be entitled to receive any bonus that has been awarded to Mr. Pierce by the Board but has not yet been paid by the Company, subject to withholding and other appropriate deductions, and (D) Mr. Pierce shall be entitled to reimbursement of any unreimbursed expenses. As a condition to receiving such payments, Mr. Pierce will sign and deliver to the Company a release in the form mutually agreed by the parties. If Mr. Pierce's employment is terminated under the Pierce Agreement by the Company for Cause (as defined in the Pierce Agreement) or by Mr. Pierce without Good Reason (as defined in the Pierce Agreement), then (i) the Pierce Agreement will be deemed to have terminated as of the date Mr. Pierce ceases to be employed by the Company, (ii) Mr. Pierce shall be entitled to receive his base salary through the date of such termination, subject to withholding and other appropriate deductions, and (iii) Mr. Pierce shall be entitled to reimbursement of any unreimbursed expenses. If Mr. Pierce's employment by the Company is terminated under the Pierce Agreement due to Mr. Pierce's death or Disability (as defined in the Pierce Agreement), then (A) the Pierce Agreement will be deemed to have terminated as of the date Mr. Pierce ceases to be employed by the Company, (B) Mr. Pierce will be entitled to continue to receive his base salary through the remainder of the term, subject to withholding and other appropriate deductions, (C) Mr. Pierce shall be entitled to receive any bonus that has been awarded to Mr. Pierce by the Board but has not yet been paid by the Company, subject to withholding and other appropriate deductions, and (D) Mr. Pierce shall be entitled to reimbursement of any unreimbursed expenses. Seperation Agreement and Release – William M. Pierce On February 19, 2016, the Company entered into a Separation Agreement and Release with Mr. Pierce pursuant to which Mr. Pierce will continue to serve as President and Chief Executive Officer of the Company under the same terms as his current employment agreement through the date of his resignation, and Mr. Pierce, or his assignees, will receive severance in the aggregate amount of $234,615, which will be filedpaid in seven installments on a monthly basis. On February 26, 2016, Mr. Pierce tendered his resignation as Chief Executive Officer and President of the Company, effective March 31, 2016. Director Compensation Director compensation for our non-employee directors is as follows: · | an annual fee of $60,000, paid quarterly on a calendar year basis; |
· | an annual committee chairman fee of $10,000, paid quarterly on a calendar year basis to the Chairman of each of our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee; |
· | a per Board meeting fee of $1,500, paid quarterly in arrears on a calendar year basis; |
· | a per committee meeting fee of $1,500, paid quarterly in arrears on a calendar year basis; |
· | an annual grant of $35,000 in restricted stock units, paid on the first day of the month following our annual meeting of stockholders (the “Annual Grant”); except that during 2015 the Compensation Committee recommended and the Board approved the replacement of the Annual Grant with a one-time cash payment of $20,000; and |
· | a one-time grant of $25,000 in restricted stock units, paid to each non-employee director upon their election or appointment to the Board. |
Also, non-employee directors are reimbursed for reasonable expenses in connection with their service on the Securities and Exchange Commission no later than 120 days afterBoard of Directors. The following table sets forth certain information regarding the end ofcompensation paid to our non-employee directors for their service during the fiscal year covered by this Form 10-K.ended December 31, 2015: Name | | Fees Earned or Paid in Cash | | | Stock Awards (2) | | | Option Awards | | | Non-Equity Incentive Plan Compensation | | | Nonqualified Deferred Compensation Earnings | | | All Other Compensation | | | Total | | | | | | | | | | | | | | | | | | | | | | | | Joseph Burke | | $ | 102,500 | | | $ | - | | | | - | | | | - | | | | - | | | | - | | | $ | 102,500 | | Richard L. Handley | | $ | 111,500 | | | $ | - | | | | - | | | | - | | | | - | | | | 100,000 | (3) | | $ | 211,500 | | Harris W. Hudson (1) | | $ | - | | | $ | - | | | | - | | | | - | | | | - | | | | - | | | $ | - | | William D. Pruitt | | $ | 115,500 | | | $ | - | | | | - | | | | - | | | | - | | | | - | | | $ | 115,500 | | David Prussky | | $ | 102,500 | | | $ | - | | | | - | | | | - | | | | - | | | | - | | | $ | 102,500 | |
_________ (1) | Mr. Hudson did not stand for re-election at the 2015 Annual Meeting of Stockholders held on October 15, 2015. During 2015, Mr. Hudson was on an indeterminate medical leave and unable to attend regularly scheduled meetings, and declined to accept board fees. |
(2) | In connection with the Sale Transaction, all outstanding restricted stock units were cancelled on November 5, 2015 and the holders received $1.05 per share. On January 15, 2016, the directors received the cash payment set forth below in connection with the restricted share unit cancellations. |
Name | | Restricted Stock Units | | | Aggregate Payment | | Joseph Burke | | | 16,037 | | | | 16,839 | | Richard L. Handley | | | 16,028 | | | | 16,829 | | William M. Pierce | | | 6,569 | | | | 6,897 | | William D. Pruitt | | | 15,477 | | | | 16,251 | | David Prussky | | | 15,455 | | | | 16,228 | |
(3) | On November 6, 2016, the Board of Directors granted Mr. Handley a bonus of $100,000 in recognition of time committed and accomplishments achieved on behalf of the Company during the year. |
ITEM 12. | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Security Ownership of Certain Beneficial Owners and Management The following table sets forth, as of March 4, 2016, information regarding the beneficial ownership of our common stock by each director, each named executive officer, all of the directors and executive officers as a group, and each other person or entity known to us to be the beneficial owner of more than five percent of our common stock. Unless noted otherwise, we believe that all persons named in the table below have sole voting and investment power with respect to all securities shown as being owned by them. Unless noted otherwise, the corporate address of each person listed below is c/o Akerman LLP, Suite 1600, 350 East Las Olas Boulevard, Fort Lauderdale, Florida 33301. Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | | Percent of Class (1) | | | | | | | | | Directors and Executive Officers: | | | | | | | Joseph Burke | | | - | | | | - | | Richard L. Handley | | | 57,790 | (2) | | | * | | William T. Nanovsky | | | - | | | | - | | William M. Pierce | | | 57,790 | (2) | | | * | | William D. Pruitt | | | 243 | | | | * | | David Prussky | | | 24,300 | (3) | | | * | | Blake W. Thompson | | | 15,500 | | | | * | | Directors and Executive Officers as a group (6 persons) | | | 140,123 | | | | * | | 5% or Greater Stockholders | | | | | | | | | H. Wayne Huizenga | | | 2,420,779 | (4) | | | 13.7 | % | Steven R. Berrard | | | 2,500,531 | (5) (2) | | | 14.1 | % | Poplar Point Capital Partners LP | | | 1,358,103 | (6) | | | 7.7 | % | Richard H. Watson | | | 1,128,226 | (7) | | | 6.4 | % |
____________ (1) | Based on 17,675,220 shares of our common stock outstanding as of March 4, 2016. | (2) | The shares of common stock held by these executive officers and director have been pledged to H. Wayne Huizenga as security for certain obligations owing pursuant to stock pledge and security agreements by each executive officer and director for the benefit of Mr. Huizenga. | (3) | Consists of 21,000 shares of common stock held by Mr. Prussky and 3,300 shares of common stock held by Mr. Prussky's spouse, Erica Prussky. | (4) | Consists of 2,420,779 shares of common stock held by Mr. Huizenga. Mr. Huizenga is the Chairman of the Board of Directors of Huizenga Holdings, Inc. The business address of Huizenga Holdings, Inc. is 450 E. Las Olas Blvd., Suite 1500, Fort Lauderdale, Florida 33301. | (5) | Consists of 2,500,531 shares of common stock held by Mr. Berrard. Mr. Berrard's address is 4521 Sharon Road, Suite 370, Charlotte, North Carolina 28211. | (6) | Based on a Schedule 13G/A filed with the SEC on January 29, 2016. The reporting person’s address is c/o Poplar Point Capital Management LLC, 840 Hinckley Road, Suite 250, Burlingame, California 94010. | (7) | Based on a Schedule 13G filed with the SEC on August 31, 2015. Mr. Watson beneficially owns 1,128,226 shares of common stock, including 614,143 shares held by PWE, LLC and 514,083 shares held by Hart Acquisitions, LLC, each an entity controlled by Mr. Watson. Mr. Watson’s address is 1193 Seven Oaks Road, Waynesboro, Georgia 30830. |
Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2015, with respect to all of our compensation plans under which equity securities are authorized for issuance: Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted average exercise price of outstanding options, warrants and rights | | | Number of securities remaining available for future issuance | | | | | | | | | | | | Equity compensation plans approved by stockholders | | | 487,213 | (1) | | $ | 13.45 | | | | 352,686 | | Equity compensation plans not approved by stockholders | | | - | | | | - | | | | - | | Total | | | 487,213 | | | $ | 13.45 | | | | 352,686 | |
____________ (1) | Includes 487,213 options to purchase shares of our common stock at a weighted average price of $13.45 per share and zero restricted stock units. In connection with the Sale Transaction, all outstanding restricted stock units were cancelled on November 5, 2015 and the holders received $1.05 per share in cash. Also in connection with the Sale Transaction, all outstanding stock options vested on November 1, 2015 and were subsequently cancelled on February 2, 2016. |
The information required by Item 12 is incorporated by reference to our Proxy Statement for our 2015 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Form 10-K.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Director Independence The information required byBoard of Directors has determined that the following non-employee directors are “independent” in accordance with the NASDAQ rules and have no material relationship with the Company, except as a director and a stockholder of the Company: Mr. Burke, Mr. Handley, Mr. Pruitt and Mr. Prussky. In determining the independence of each of the non-employee directors, the Board of Directors considered the relationships described under “Related Party Transactions.” In each case, the relationships did not violate NASDAQ listing standards or our Principles, and the Board of Directors concluded that such relationships would not impair the independence of our non-employee directors. Related Party Transactions As set forth in the written Audit Committee Charter, our Audit Committee must approve all transactions with related persons as described in Item 13404 of Regulation S-K under the Exchange Act. The following is incorporated by referencea summary of agreements or transactions with parties related to our Proxy Statement for our 2015 Annual Meetingdirectors, executive officers, or us since January 1, 2014. The SCA Group, LLC On June 11, 2013, the Company entered into an Executive Services Agreement with The SCA Group, LLC (the “SCA Group”), effective June 9, 2013, in connection with the services provided by William T. Nanovsky as Senior Vice President and Chief Financial Officer of Stockholders, whichthe Company (the “Executive Services Agreement”). The Executive Services Agreement replaced the Interim Services Agreement, effective September 24, 2012, with the SCA Group. Pursuant to the Executive Services Agreement, the Company will pay the SCA Group a bi-weekly fee of $1,153.85 and Mr. Nanovsky a bi-weekly salary of $10,384.61, such amounts may increase on an annual basis consistent with the Company's policy as it applies to its senior management. Mr. Nanovsky will participate in the Company's bonus program, as it applies to senior management, with a bonus target of 50% of the payments to the SCA Group and Mr. Nanovsky. Any bonus will be filedpaid 10% to SCA Group and 90% to Mr. Nanovsky. Mr. Nanovsky will remain a partner of SCA Group. We paid the SCA Group an aggregate of $30,962 and $30,000 pursuant to the Executive Services Agreement during 2015 and 2014, respectively. Pursuant to the Executive Services Agreement, the Company will reimburse Mr. Nanovsky for all reasonable travel and out-of-pocket expenses in connection with his services to the Company. The Company will provide Mr. Nanovsky up to two round trip flights to Florida from North Carolina per month and a daily per diem equal to the then current U.S.A. General Services Administration dinner allowance for Charlotte, North Carolina (currently $29.00). Also, pursuant to the Executive Services Agreement, the Company will provide an apartment to Mr. Nanovsky in Charlotte, North Carolina, and Mr. Nanovsky will participate in the Company's benefit plans as they apply to senior management. The Executive Services Agreement may be terminated by either party by providing a minimum of 30 days' advance notice. Also, the SCA Group may terminate the Executive Services Agreement immediately upon written notice to the Company if (i) the Company is engaged in or asks the SCA Group or any SCA Group professional to engage in or ignore any illegal or unethical activity, (ii) Mr. Nanovsky ceases to be a SCA Group professional for any reason, (iii) Mr. Nanovsky becomes disabled, or (iv) the Company fails to pay any amounts due to the SCA Group under the Executive Services Agreement when due. In lieu of terminating the Executive Services Agreement under (ii) and (iii) above, upon mutual agreement of the parties, Mr. Nanovsky may be replaced by another SCA Group professional. In addition, pursuant to the Executive Services Agreement, Mr. Nanovsky will participate in the Company's Amended and Restated 2010 Stock Incentive Plan (the “Stock Incentive Plan”). Any awards granted will be issued 10% as a warrant to the SCA Group and 90% to Mr. Nanovsky under the Stock Incentive Plan. On June 10, 2013, in connection with the Securities and Exchange Commission no later than 120 days afterExecutive Services Agreement, the endCompany granted Mr. Nanovsky an option to purchase 13,500 shares of common stock of the fiscal year covered by this Form 10-K.Company under the Stock Incentive Plan with an exercise price of $9.30. The option vested annually in four equal installments commencing on the first anniversary of the grant date. The option originally had a term of ten years. In connection with the Sale Transaction, these options vested on November 1, 2015 and were cancelled on February 2, 2016. Also in connection with the Executive Services Agreement, on June 10, 2013, the Company granted the SCA Group a warrant to purchase 1,500 shares of common stock of the Company with an exercise price of $9.30. The warrant vests annually in four equal installments commencing on June 10, 2014. During 2014, the SCA Group was granted a warrant to purchase 2,000 shares of common stock of the Company with an exercise price of $4.04, which vested in four equal installments commencing on August 7, 2014. The warrants originally had a term of ten years. In connection with the Sale Transaction, these warrants were vested on November 1, 2015 and cancelled on February 2, 2016. On February 19, 2016, Mr. Nanovsky resigned as Senior Vice President, Chief Financial Officer and Secretary effective March 31, 2016. As a result, the Executive Services Agreement (described below) will be terminated effective March 31, 2016. ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. On May 15, 2015, the Company’s Audit Committee approved the dismissal of BDO USA, LLP (“BDO”) as the Company’s independent registered public accounting firm, effective May 18, 2015. Also, on May 15, 2015, the Company’s Audit Committee approved the engagement of Grant Thornton LLP (“Grant Thornton”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015. The engagement of Grant Thornton was effective May 19, 2015. Auditor Fees and Services The information required by Item 14 is incorporated by reference to our Proxy Statementfollowing table sets forth Grant Thornton’ and BDO's fees for ourthe year ended December 31, 2015 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Form 10-K.2014. | | 2015 | | | 2014 | | | | | | | | | Audit Fees | | $ | 914,000 | | | $ | 1,288,000 | | Tax Fees | | | 90,000 | | | | 125,000 | | All Other Fees (1) | | | 1,663,000 | | | | 419,000 | | Total | | $ | 2,667,000 | | | $ | 1,832,000 | |
_____________ (1) | These amounts relate to costs incurred by BDO associated with certain government agencies' ongoing inquiries and request for information related to the Company. |
Policy for Approval of Audit and Permitted Non-Audit Services The Audit Committee has adopted a policy and related procedures requiring its pre-approval of all audit and non-audit services to be rendered by its independent registered public accounting firm. These policies and procedures are intended to ensure that the provision of such services do not impair the independent registered public accounting firm's independence. These services may include audit services, audit related services, tax services and other services. The policy provides for the annual establishment of fee limits for various types of audit services, audit related services, tax services and other services, within which the services are deemed to be pre-approved by the Audit Committee. The independent registered public accounting firm is required to provide to the Audit Committee back up information with respect to the performance of such services. All services provided by Grant Thornton and BDO during the fiscal years ended December 31, 2015 and 2014 were approved by the Audit Committee. The Audit Committee has delegated to its Chair the authority to pre-approve services, up to a specified fee limit, to be rendered by the independent registered public accounting firm and requires that the Chair report to the Audit Committee any pre-approved decisions made by the Chair at the next scheduled meeting of the Audit Committee. PART IV | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a)(1) Financial Statements The consolidated financial statements begin on page F-1. (a)(2) Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts All other schedules not included have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the consolidated financial statements or the notes to the consolidated financial statements. (a)(3) Exhibits Exhibit Number | | Description | | | | 2.1 | | Agreement and Plan of Merger, dated February 13, 2011. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on February 17, 2011). | 2.2 | | Amendment to Agreement and Plan of Merger, dated as of February 28, 2011, by and among Swisher Hygiene Inc., SWSH Merger Sub, Inc., Choice Environmental Services, Inc., and the other parties set forth therein. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on March 4, 2011). | 2.3 | | Stock Purchase Agreement, dated November 15, 2012, by and between Swisher Hygiene Inc. and Waste Services of Florida, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2012 and schedules and similar attachments of this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish on a supplemental basis a copy of any omitted schedules and similar attachments to the Securities and Exchange Commission upon request). | 2.4 | | Stock Purchase Agreement, dated August 12, 2015, by and between Swisher Hygiene Inc. and Ecolab Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 13, 2015, and incorporated herein by reference). | 3.1 | | Certificate of Corporate Domestication of CoolBrands International Inc., dated November 1, 2010. (1) | 3.2 | | Amended and Restated Certificate of Incorporation of Swisher Hygiene Inc. (2) | 3.3 | | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Swisher Hygiene Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2014). | 3.4 | | Bylaws of Swisher Hygiene Inc. (1) | 10.1 | | Promissory Note, dated May 26, 2010, as amended, in the principal amount of $21,445,000 to Royal Palm Mortgage Group, LLC. (1) | 10.2 | | Promissory Note, dated August 9, 2010, in the principal amount of $2,000,000 to Royal Palm Mortgage Group, LLC. (1) | 10.3 | | Promissory Note, dated August 9, 2010, in the principal amount of $1,500,000 to Royal Palm Mortgage Group, LLC. (1) | 10.4 | | Credit Agreement among Swisher Hygiene, Inc., the lenders named therein and Wells Fargo Bank, National Association, dated March 30, 2011 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 5, 2011). | 10.5 | | Pledge and Security Agreement by Swisher Hygiene Inc., certain subsidiaries of Swisher Hygiene, Inc. named therein, and Wells Fargo Bank, National Association, dated March 30, 2011 (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 5, 2011 and portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment). | 10.6 | | Guaranty Agreement by certain subsidiaries of Swisher Hygiene Inc. and Guaranteed Parties named therein, dated March 30, 2011 (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 5, 2011). |
10.7 | | CoolBrands International Inc. 2002 Stock Option Plan. (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8, filed on February 14, 2011). † | 10.8 | | Omnibus Amendment Agreement, effective as of February 28, 2011, by and between Swisher International, Inc. HB Service, LLC and Wells Fargo Bank, National Association. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 4, 2011). | 10.9 | | Amended and Restated Swisher Hygiene Inc. 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 9, 2011).* † | 10.10 | | Swisher Hygiene Inc. Senior Executive Officers Performance Incentive Bonus Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2011).* † | 10.11 | | Employment and Non-Compete Agreement of Michael Kipp (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2011).* † | 10.12 | | First Amendment to Credit Agreement and Pledge and Security Agreement, dated August 12, 2011, by and between Swisher Hygiene Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 18, 2011). | 10.13 | | General Electric Capital Corporation Loan Commitment Letter, dated August 12, 2011 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2011). | 10.14 | | Master Loan and Security Agreement, dated August 12, 2011, by and between General Electric Capital Corporation and Choice Environmental Services, Inc. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2011). |
10.15 | | Amendment to Master Loan and Security Agreement, dated August 12, 2011, by and between General Electric Capital Corporation and Choice Environmental Services, Inc. (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2011). | 10.16 | | Wells Fargo Equipment Finance, Inc. Loan Commitment Letter dated August 12, 2011 (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2011). | 10.17 | | Master Loan and Security Agreement dated August 12, 2011, by and between Wells Fargo Equipment Finance, Inc. and Choice Environmental Services, Inc. (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2011). | 10.18 | | Automotive Rentals, Inc. Vehicle Lease Financing Proposal, dated August 12, 2011 (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2011). | 10.19 | | Second Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated April 12, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 2012). | 10.20 | | Third Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated May 15, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 17, 2012). | 10.21 | | Fourth Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated May 30, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2012). | 10.22 | | Fifth Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated June 28, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 29, 2012). | 10.23 | | Sixth Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated July 30, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2012). |
10.24 | | Seventh Amendment to Credit Agreement and Pledge and Security Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated August 31, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2012 and portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment). | 10.25 | | Eighth Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated September 27, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 27, 2012). | 10.26 | | Ninth Amendment to Credit Agreement by and among Swisher Hygiene, Inc., the Subsidiary Guarantors party thereto, the Required Lenders, and Wells Fargo Bank, National Association, dated October 31, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 1, 2012). | 10.27 | | Employment Letter, dated June 1, 2012, by and between Swisher Hygiene, Inc. and Brian Krass (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the Securities and Exchange Commission on March 15, 2013). † | 10.28 | | Interim Services Agreement, effective September 24, 2012, between Swisher Hygiene Inc. and SCA Group, LLC (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2012, filed with the Securities and Exchange Commission on March 18, 2013). † | 10.29 | | Consulting Agreement and Release between Steven R. Berrard and Swisher International, Inc., effective October 26, 2012 (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on May 1, 2013). † | 10.30 | | Separation Agreement and Release between Hugh Cooper and Swisher International Inc., dated November 15, 2012 (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on May 1, 2013). † | 10.31 | | Executive Services Agreement, effective June 9, 2013, between Swisher Hygiene Inc. and The SCA Group, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2013, filed with the Securities and Exchange Commission on August 9, 2013). † | 10.32 | | Employment Agreement, dated October 16, 2013, between Swisher Hygiene Inc. and William M. Pierce. † | 10.33 | | Employment Agreement, dated October 16, 2013, between Swisher Hygiene Inc. and Thomas C. Byrne. † | 10.34 | | Separation Agreement and Release between Swisher Hygiene Inc. and Thomas E. Aucamp, dated March 7, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed with the Securities and Exchange Commission on May 12, 2014). † | 10.35 | | Amendment No. 1 to the Employment Agreement between Swisher Hygiene Inc. and Thomas C. Byrne, dated July 14, 2014 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the Securities and Exchange Commission on November 10, 2014). † | 10.36 | | Amendment to Employment Agreement by and between Swisher Hygiene Inc. and William M. Pierce, dated August 8, 2014 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the Securities and Exchange Commission on November 10, 2014). † |
10.37 | | Loan and Security Agreement by and among Swisher Hygiene Inc., as Guarantor, the Borrowers listed thereto and Siena Lending Group LLC, as Lender, dated August 29, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2014). (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment). | 10.38 | | Second Amendment to Employment Agreement by and between Swisher Hygiene Inc. and William M. Pierce, dated January 31, 2015. † | 10.39 | | Letter Agreement, dated as of March 25, 2015, by and among Siena Lending Group LLC and the Borrowers listed thereto. |
10.40 | | Second Amendment to Employment Agreement by and between Swisher Hygiene Inc. and William M. Pierce, dated January 31, 2015 (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on April 1, 2015). † | 10.41 | | Letter Agreement, dated as of March 25, 2015, by and among Siena Lending Group LLC and the Borrowers listed thereto (incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on April 1, 2015). | 10.42 | | Waiver letter, dated May 11, 2015 by Siena Lending Group LLC (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the Securities and Exchange Commission on May 11, 2015). | 10.43 | | Deferred Prosecution Agreement, dated October 7, 2015, by and between the United States of America and Swisher Hygiene Inc. | 21.1 | | Subsidiaries of Swisher Hygiene Inc. | 23.1 | | Consent of BDO USA, LLP. | 31.1 | | Section 302 Certification of Chief Executive Officer. | 31.2 | | Section 302 Certification of Chief Financial Officer. | 32.1 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | 32.2 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | 101.INS | | XBRL Instance Document. | 101.SCH | | XBRL Taxonomy Extension Schema. | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase. | 101.LAB | | XBRL Taxonomy Extension Label Linkbase. | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. |
________________________ The following documents are incorporated by reference to the indicated exhibit to the following filings by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. (1) | Registration Statement on Form 10, filed with the Securities and Exchange Commission on November 9, 2010. |
(2) | Registration Statement on Form S-8, filed with the Security and Exchange Commission on May 9, 2011. |
* | Furnished herewith. | † | Management contracts or compensatory plans, contracts, or arrangements. |
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | SWISHER HYGIENE INC. | | | | | | 15, 2016 | By: | /s/ William M. Pierce | | | | William M. Pierce | | | | President and Chief Executive Officer (Principal Executive Officer) | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature | | Title | | Date | | | | | | /s/ William M. Pierce | | President, Chief Executive Officer, and Director | | 15, 2016 | | | (Principal Executive Officer) | | | | | | | | /s/ William T. Nanovsky | | Senior Vice President, and Chief Financial Officer and Secretary | | | | | (Principal Financial Officer and Principal Accounting Officer) | | | | | | | | /s/ Linda C. Wilson-Ingram Richard L. Handley | | Vice President, Corporate Controller and
Chairman of the Board | | | | | Chief Accounting Officer (Principal Accounting Officer) | | |
| | | | | /s/ Richard L. Handley
| | | | | | | | | | | | | | | /s/ Joseph Burke | | | | | | | | | |
| | | | | /s/ William D. Pruitt | | Director | | | William D. Pruitt | | | | | | | | | | /s/ M. David Prussky | | | | | M. David Prussky | | | | |
| | | | | /s/ William D. Pruitt
| | | | | | | | | | | | | | | /s/ David Prussky
| | | | | | | | | |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SWISHER HYGIENE INC. AND SUBSIDIARIES Consolidated Financial Statements as of December 31, 20142015 and 2013,2014, and for the ThreeTwo Years Ended December 31, 20142015 ReportsReport of Grant Thornton, LLP, Independent Registered Public Accounting Firm | | F-2 | Report of BDO USA, LLP, Independent Registered Public Accounting Firm | | F-3 | Consolidated Balance Sheets | | F-4 | Consolidated Statements of Operations and Comprehensive Loss | | F-5 | Consolidated Statements of Equity | | F-6 | Consolidated Statements of Cash Flows | | F-7 | Notes to Consolidated Financial Statements | | F-8 |
Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Swisher Hygiene Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of Swisher Hygiene Inc. (a Delaware corporation) and Subsidiaries (the “Company”) as of December 31, 2015, and the related consolidated statements of operations and comprehensive loss, equity, and cash flows for the year ended December 31, 2015. Our audit of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Swisher Hygiene Inc. and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for the year ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ GRANT THORNTON LLP Columbia, South Carolina March 15, 2016 Report of Independent Registered Public Accounting Firm Board of Directors Swisher Hygiene Inc. and Subsidiaries Charlotte, North Carolina
We have audited the accompanying consolidated balance sheets of Swisher Hygiene Inc. and Subsidiaries (the "Company") as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive loss, equity, and cash flows for each of the three years in the periodyear ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.audit. We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also 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, as well as evaluating the overall financial statement presentation. We believe that our audits provideaudit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Swisher Hygiene Inc. and Subsidiaries as of December 31, 2014, and 2013, and the results of its operations and its cash flows for each of the three years in the periodyear ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. The accompanying consolidated financial statements have beenfor the period ended December 31, 2014 were prepared assuming that the Company will continue as a going concern. As described in Note 1 to the 2014 consolidated financial statements, the Company has suffered recurring losses from operations and has not generated positive cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters arewere also described in Note 1.1 to the 2014 financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We also audited, in accordance with the Standards of the Public Company Accounting Oversight Board (United States), Swisher Hygiene Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 31, 2015 expressed an adverse opinion thereon.
/s/ BDO USA, LLP Charlotte, North Carolina Report except for the effects of Independent Registered Public Accounting Firm
Board of Directorsdiscontinued operations and Stockholders
Swisher Hygiene Inc.
Charlotte, NC
We have audited Swisher Hygiene Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Swisher Hygiene Inc.’s management is responsibleassets held for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, "Management's Report on Internal Control Over Financial Reporting". Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses have been identified andsale described in management’s assessment. These material weaknesses were considered in determiningNote 2 to the nature, timing, and extent of audit tests applied in our audit of the 2014 consolidated financial statements and this report does not affect our report dated March 31, 2015 on those financial statements.
In our opinion, Swisher Hygiene Inc. did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.
We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company afterwhich the date of management’s assessment.is March 15, 2016
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Swisher Hygiene Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive loss, equity, and cash flows for each of the three years in the period ended December 31, 2014 and our report dated March 31, 2015 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
Charlotte, NC
March 31, 2015
SWISHER HYGIENE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 20142015 and 20132014 (In thousands)thousands except share data) | | 2014 | | | 2013 | | ASSETS | | | | | | | Current assets | | | | | | | Cash and cash equivalents | | $ | 7,233 | | | $ | 21,465 | | Restricted cash | | | 231 | | | | 3,558 | | Accounts receivable, net | | | 18,751 | | | | 21,010 | | Inventory, net | | | 15,426 | | | | 14,032 | | Deferred income taxes | | | 534 | | | | 935 | | Assets held for sale | | | - | | | | 4,520 | | Other assets | | | 2,525 | | | | 5,782 | | Total current assets | | | 44,700 | | | | 71,302 | | Restricted cash | | | - | | | | 2,117 | | Property and equipment, net | | | 37,037 | | | | 43,842 | | Goodwill | | | - | | | | 5,821 | | Other intangibles, net | | | 6,654 | | | | 8,436 | | Customer relationships and contracts, net | | | 22,792 | | | | 28,575 | | Other noncurrent assets | | | 2,015 | | | | 1,624 | | Total assets | | $ | 113,198 | | | $ | 161,717 | | | | | | | | | | | LIABILITIES AND EQUITY | | | | | | | | | Current liabilities | | | | | | | | | Accounts payable | | $ | 13,627 | | | $ | 8,794 | | Accrued payroll and benefits | | | 3,467 | | | | 3,819 | | Accrued expense | | | 7,122 | | | | 8,132 | | Long-term debt and obligations due within one year | | | 1,884 | | | | 5,251 | | Liabilities of discontinued operations | | | - | | | | 2,131 | | Total current liabilities | | | 26,100 | | | | 28,127 | | Long-term debt and obligations | | | 1,185 | | | | 2,003 | | Deferred income taxes | | | 558 | | | | 1,053 | | Other long-term liabilities | | | 4,065 | | | | 3,348 | | Total noncurrent liabilities | | | 5,808 | | | | 6,404 | | | | | | | | | | | Commitments and contingencies (Notes 2, 3, 6, 7, 10, 13, 15) | | | | | | | | | | | | | | | | | | Equity (1) | | | | | | | | | Preferred stock, par value $0.001, authorized 10,000,000 shares; no shares issued and outstanding at December 31, 2014 and 2013 | | | - | | | | - | | Common stock, par value $0.001, authorized 600,000,000 shares; 17,612,278 shares and 17,576,741 shares issued and outstanding at December 31, 2014 and 2013 | | | 18 | | | | 18 | | Additional paid-in capital | | | 389,942 | | | | 388,252 | | Accumulated deficit | | | (307,363 | ) | | | (260,555 | ) | Accumulated other comprehensive loss | | | (1,307 | ) | | | (529 | ) | Total equity | | | 81,290 | | | | 127,186 | | Total liabilities and equity | | $ | 113,198 | | | $ | 161,717 | |
(1) | All outstanding share amounts and computations using such amounts have been retroactively adjusted to reflect the June 3, 2014 one-for-ten reverse stock split. |
| | 2015 | | | 2014 | | ASSETS | | | | | | | Current assets | | | | | | | Cash and cash equivalents | | $ | 25,228 | | | $ | - | | Restricted cash | | | 318 | | | | - | | Accounts receivable | | | 2,158 | | | | - | | Other assets | | | 1,513 | | | | 911 | | Current assets of discontinued operations | | | - | | | | 43,790 | | Total current assets | | | 29,217 | | | | 44,701 | | Property and equipment, net | | | 26 | | | | - | | Other noncurrent assets | | | 162 | | | | 203 | | Noncurrent assets of discontinued operations | | | - | | | | 68,295 | | Total assets | | $ | 29,405 | | | $ | 113,199 | | | | | | | | | | | LIABILITIES AND EQUITY | | | | | | | | | Current liabilities | | | | | | | | | Accounts payable | | $ | 587 | | | $ | 508 | | Accrued payroll and benefits | | | 235 | | | | 576 | | Accrued expense | | | 2,650 | | | | 1,249 | | Long-term debt and obligations due within one year | | | - | | | | 1,790 | | Liabilities of discontinued operations | | | - | | | | 21,979 | | Total current liabilities | | | 3,472 | | | | 26,102 | | Long term debt and obligations | | | - | | | | 1,078 | | Deferred income taxes | | | - | | | | - | | Other long term liabilities | | | 1,575 | | | | 3,340 | | Long-term liabilities of discontinued operations | | | - | | | | 1,389 | | Total noncurrent liabilities | | | 1,575 | | | | 5,807 | | | | | | | | | | | Commitments and contingencies | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | Preferred stock, par value $0.001, authorized 10,000,000 shares; no shares issued and outstanding at December 31, 2015 and 2014 | | | - | | | | - | | Common stock, par value $0.001, authorized 600,000,000 shares; 17,675,220 shares and 17,612,278 shares issued and outstanding at December 31, 2015 and 2014 | | | 18 | | | | 18 | | Additional paid-in capital | | | 390,557 | | | | 389,942 | | Accumulated deficit | | | (364,953 | ) | | | (307,363 | ) | Accumulated other comprehensive loss | | | (1,264 | ) | | | (1,307 | ) | Total equity | | | 24,358 | | | | 81,290 | | Total liabilities and equity | | $ | 29,405 | | | $ | 113,199 | |
See Accompanying Notes to Consolidated Financial Statements SWISHER HYGIENE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the ThreeTwo Years Ended December 31, 20142015 (In thousands except share and per share data) | | 2014 | | | 2013 | | | 2012 | | Revenue | | | | | | | | | | Products | | $ | 173,505 | | | $ | 189,480 | | | $ | 202,968 | | Services | | | 18,877 | | | | 22,895 | | | | 26,186 | | Franchise and other | | | 1,375 | | | | 1,313 | | | | 1,367 | | Total revenue | | | 193,757 | | | | 213,688 | | | | 230,521 | | | | | | | | | | | | | | | Costs and expenses | | | | | | | | | | | | | Cost of sales (exclusive of route expenses and related depreciation and amortization) | | | 89,101 | | | | 95,585 | | | | 101,914 | | Route expenses | | | 50,595 | | | | 54,227 | | | | 54,988 | | Selling, general, and administrative expenses | | | 69,269 | | | | 94,620 | | | | 110,975 | | Acquisition and merger expenses | | | - | | | | - | | | | 582 | | Depreciation and amortization | | | 21,216 | | | | 22,113 | | | | 20,991 | | Impairment loss on assets held for sale | | | 2,989 | | | | 6,422 | | | | - | | Impairment loss on goodwill | | | 5,821 | | | | 93,194 | | | | - | | Total costs and expenses | | | 238,991 | | | | 366,160 | | | | 289,450 | | Loss from continuing operations | | | (45,234 | ) | | | (152,472 | ) | | | (58,929 | ) | | | | | | | | | | | | | | Other expense, net | | | (1,663 | ) | | | (654 | ) | | | (3,093 | ) | Net loss from continuing operations before income taxes | | | (46,897 | ) | | | (153,126 | ) | | | (62,022 | ) | Income tax benefit (expense) | | | 89 | | | | 2,594 | | | | (18,753 | ) | Net loss from continuing operations | | | (46,808 | ) | | | (150,532 | ) | | | (80,775 | ) | | | | | | | | | | | | | | Discontinued operations, net of tax (Note 2) | | | | | | | | | | | | | Net loss from operations through disposal | | | - | | | | (2,516 | ) | | | (6,245 | ) | Gain on disposal | | | - | | | | - | | | | 13,844 | | (Loss) income from discontinued operations, net of tax | | | - | | | | (2,516 | ) | | | 7,599 | | Net loss | | | (46,808 | ) | | | (153,048 | ) | | | (73,176 | ) | | | | | | | | | | | | | | Comprehensive loss | | | | | | | | | | | | | Employee benefit plan adjustment, net of tax | | | (747 | ) | | | 503 | | | | (161 | ) | Foreign currency translation adjustment | | | (31 | ) | | | (33 | ) | | | (3 | ) | Comprehensive loss | | $ | (47,586 | ) | | $ | (152,578 | ) | | $ | (73,340 | ) | | | | | | | | | | | | | | Loss per share (1) | | | | | | | | | | | | | Basic and diluted (continuing operations) | | $ | (2.64 | ) | | $ | (8.55 | ) | | $ | (4.62 | ) | Basic and diluted (discontinued operations) | | | - | | | $ | (0.14 | ) | | $ | 0.43 | | | | | | | | | | | | | | | Weighted-average common shares used in the computation of loss per share (1) | | | | | | Basic and diluted | | | 17,723,866 | | | | 17,599,535 | | | | 17,500,956 | |
| | 2015 | | | 2014 | | Revenue | | $ | - | | | $ | - | | | | | | | | | | | Costs and expenses | | | | | | | | | Selling, general, and administrative expenses | | | 9,260 | | | | 6,364 | | Depreciation and amortization | | | 1 | | | | - | | Total costs and expenses | | | 9,261 | | | | 6,364 | | Other expense, net | | | (2,065 | ) | | | (134 | ) | Loss from continuing operations before income taxes | | | (11,326 | ) | | | (6,498 | ) | Income tax (expense) benefit | | | - | | | | - | | Loss from continuing operations | | | (11,326 | ) | | | (6,498 | ) | | | | | | | | | | Discontinued operations | | | | | | | | | Loss from discontinued operations | | | (46,307 | ) | | | (40,399 | ) | Income tax benefit | | | 43 | | | | 89 | | Loss on discontinued operations | | | (46,264 | ) | | | (40,310 | ) | Net loss | | | (57,590 | ) | | | (46,808 | ) | | | | | | | | | | Comprehensive loss | | | | | | | | | Employee benefit plan adjustment, net of tax | | | (82 | ) | | | (747 | ) | Foreign currency translation adjustment | | | 125 | | | | (31 | ) | Comprehensive loss | | $ | (57,547 | ) | | $ | (47,586 | ) | | | | | | | | | | Loss per share (1) | | | | | | | | | Basic and diluted (Continuing operations) | | $ | (0.64 | ) | | $ | (0.37 | ) | Basic and diluted (Discontinued operations) | | $ | (2.61 | ) | | $ | (2.27 | ) | Basic and diluted | | $ | (3.25 | ) | | $ | (2.64 | ) | | | | | | | | | | Weighted-average common shares used in the computation of loss per share (1) | | | | | | | | | Basic and diluted | | | 17,741,051 | | | | 17,723,866 | |
(1) | All outstanding share amounts and computations using such amounts have been retroactively adjusted to reflect the June 3, 2014 one-for-ten reverse stock split. |
See Notes to Consolidated Financial Statements
SWISHER HYGIENE INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2014
(In thousands except share data)
STOCKHOLDERS' EQUITY
| | Shares | | | Common Stock (1) | | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Swisher Hygiene Inc. Stockholders' | | | Non - Controlling | | | Total | | Balance at December 31, 2011 | | | 17,480,419 | | | $ | 17 | | | $ | 378,982 | | | $ | (34,331 | ) | | $ | (835 | ) | | $ | 343,833 | | | $ | 22 | | | $ | 343,855 | | Issuance of common stock on contingent earn-out | | | 9,091 | | | | - | | | | 170 | | | | - | | | | - | | | | 170 | | | | - | | | | 170 | | Conversion of promissory notes payable | | | 1,004 | | | | - | | | | 37 | | | | - | | | | - | | | | 37 | | | | - | | | | 37 | | Stock based compensation (including discontinued operations of $2,863) | | | - | | | | - | | | | 6,384 | | | | - | | | | - | | | | 6,384 | | | | - | | | | 6,384 | | Issuance of common stock under stock based payment plans | | | 23,637 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Shares issued for non-controlling interest | | | 1,000 | | | | - | | | | 37 | | | | - | | | | - | | | | 37 | | | | - | | | | 37 | | Employee benefit plan adjustment, net of tax | | | - | | | | - | | | | - | | | | - | | | | (161 | ) | | | (161 | ) | | | - | | | | (161 | ) | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (3 | ) | | | (3 | ) | | | - | | | | (3 | ) | Net loss | | | - | | | | - | | | | - | | | | (73,176 | ) | | | - | | | | (73,176 | ) | | | - | | | | (73,176 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2012 | | | 17,515,151 | | | | 17 | | | | 385,610 | | | | (107,507 | ) | | | (999 | ) | | | 277,121 | | | | 22 | | | | 277,143 | | Stock based compensation | | | - | | | | - | | | | 2,916 | | | | - | | | | - | | | | 2,916 | | | | - | | | | 2,916 | | Issuance of common stock under stock based payment plans | | | 88,996 | | | | 1 | | | | - | | | | - | | | | - | | | | 1 | | | | - | | | | 1 | | Shares withheld related to income taxes on RSUs | | | (27,406 | ) | | | - | | | | (274 | ) | | | - | | | | - | | | | (274 | ) | | | - | | | | (274 | ) | Liquidation of minority interest | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (22 | ) | | | (22 | ) | Employee benefit plan adjustment, net of tax | | | - | | | | - | | | | - | | | | - | | | | 503 | | | | 503 | | | | - | | | | 503 | | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (33 | ) | | | (33 | ) | | | - | | | | (33 | ) | Net loss | | | - | | | | - | | | | - | | | | (153,048 | ) | | | - | | | | (153,048 | ) | | | - | | | | (153,048 | ) | Balance at December 31, 2013 | | | 17,576,741 | | | | 18 | | | | 388,252 | | | | (260,555 | ) | | | (529 | ) | | | 127,186 | | | | - | | | | 127,186 | | Stock based compensation | | | - | | | | - | | | | 1,740 | | | | - | | | | - | | | | 1,740 | | | | - | | | | 1,740 | | Shares withheld related to income taxes on RSUs | | | (10,857 | ) | | | - | | | | (47 | ) | | | - | | | | - | | | | (47 | ) | | | - | | | | (47 | ) | Shares issued in connection with RSU delivery | | | 46,394 | | | | - | | | | (3 | ) | | | - | | | | - | | | | (3 | ) | | | - | | | | (3 | ) | Employee benefit plan adjustment, net of tax | | | - | | | | - | | | | - | | | | - | | | | (747 | ) | | | (747 | ) | | | - | | | | (747 | ) | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (31 | ) | | | (31 | ) | | | - | | | | (31 | ) | Net loss | | | - | | | | - | | | | - | | | | (46,808 | ) | | | - | | | | (46,808 | ) | | | - | | | | (46,808 | ) | Balance at December 31, 2014 | | | 17,612,278 | | | | 18 | | | | 389,942 | | | | (307,363 | ) | | | (1,307 | ) | | | 81,290 | | | | - | | | | 81,290 | |
(1) | All outstanding share amounts and computations using such amounts have been retroactively adjusted to reflect the June 3, 2014 one-for-ten reverse stock split. |
See Accompanying Notes to Consolidated Financial Statements SWISHER HYGIENE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE TWO YEARS ENDED DECEMBER 31, 2015 (In thousands except share data) STOCKHOLDERS' EQUITY | | Common Stock (1) | | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Total | | | | Shares | | | Amount | | | Capital (1) | | | Deficit | | | (Loss) | | | Equity | | Balance at December 31, 2013 | | | 17,576,741 | | | $ | 18 | | | $ | 388,252 | | | $ | (260,555 | ) | | $ | (529 | ) | | $ | 127,186 | | Stock based compensation | | | - | | | | - | | | | 1,740 | | | | - | | | | - | | | | 1,740 | | Shares withheld related to income taxes on RSUs | | | (10,857 | ) | | | - | | | | (47 | ) | | | - | | | | - | | | | (47 | ) | Shares issued in connection with RSU delivery | | | 46,394 | | | | - | | | | (3 | ) | | | - | | | | - | | | | (3 | ) | Employee benefit plan adjustment, net of tax | | | - | | | | - | | | | - | | | | - | | | | (747 | ) | | | (747 | ) | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (31 | ) | | | (31 | ) | Net loss | | | - | | | | - | | | | - | | | | (46,808 | ) | | | - | | | | (46,808 | ) | Balance at December 31, 2014 | | | 17,612,278 | | | | 18 | | | | 389,942 | | | | (307,363 | ) | | | (1,307 | ) | | | 81,290 | | Stock based compensation | | | - | | | | - | | | | 704 | | | | - | | | | - | | | | 704 | | Accelerated vesting of RSUs | | | - | | | | - | | | | (73 | ) | | | - | | | | - | | | | (73 | ) | Payout in lieu of issuing RSUs | | | - | | | | - | | | | (12 | ) | | | - | | | | - | | | | (12 | ) | Shares issued in connection with RSU delivery | | | 62,942 | | | | - | | | | (4 | ) | | | - | | | | - | | | | (4 | ) | Employee benefit plan adjustment, net of tax | | | - | | | | - | | | | - | | | | - | | | | (82 | ) | | | (82 | ) | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | 125 | | | | 125 | | Net loss | | | - | | | | - | | | | - | | | | (57,590 | ) | | | - | | | | (57,590 | ) | Balance at December 31, 2015 | | | 17,675,220 | | | | 18 | | | | 390,557 | | | | (364,953 | ) | | | (1,264 | ) | | | 24,358 | |
(1) | All outstanding share amounts and computations using such amounts have been retroactively adjusted to reflect the June 3, 2014 one-for-ten reverse stock split. | | |
See Accompanying Notes to Consolidated Financial Statements SWISHER HYGIENE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREETWO YEARS ENDED DECEMBER 31, 20142015 (In thousands) | | 2014 | | | 2013 | | | 2012 | | Operating activities | | | | | | | | | | Net loss | | $ | (46,808 | ) | | $ | (153,048 | ) | | $ | (73,176 | ) | Adjustments to reconcile net loss to cash used in operating activities: | | | | | | | | | | Net loss (income) from discontinued operations, net of tax | | | - | | | | 2,516 | | | | (7,599 | ) | Depreciation and amortization | | | 21,216 | | | | 22,113 | | | | 20,991 | | Provision for doubtful accounts | | | 196 | | | | 936 | | | | 2,396 | | Stock based compensation | | | 1,740 | | | | 2,916 | | | | 3,521 | | Realized and unrealized gain on fair value of convertible notes | | | - | | | | - | | | | (241 | ) | Deferred income taxes | | | (94 | ) | | | (2,553 | ) | | | 18,370 | | Impairment loss on assets held for sale | | | 2,989 | | | | 6,422 | | | | - | | Impairment loss on goodwill | | | 5,821 | | | | 93,194 | | | | - | | Loss on disposal of property and equipment | | | 195 | | | | 33 | | | | - | | Loss (gain) on sale of assets held for sale | | | 754 | | | | (223 | ) | | | - | | Changes in operating assets and liabilities: | | | | | | | | | | | | | Accounts receivable | | | 2,325 | | | | (279 | ) | | | 3,739 | | Inventory | | | (247 | ) | | | 1,295 | | | | 448 | | Accounts payable, accrued expense and other current liabilities | | | 3,403 | | | | (3,084 | ) | | | (6,598 | ) | Other assets and non-current assets | | | 2,187 | | | | (111 | ) | | | (1,095 | ) | Net cash used in operating activities of continuing operations | | | (6,322 | ) | | | (29,873 | ) | | | (39,244 | ) | Net cash used in operating activities of discontinued operations | | | (2,131 | ) | | | (4,647 | ) | | | (3,519 | ) | Cash used in operating activities | | | (8,453 | ) | | | (34,520 | ) | | | (42,763 | ) | Investing activities | | | | | | | | | | | | | Cash received for sale of discontinued operations | | | - | | | | 12,571 | | | | 111,841 | | Purchases of property and equipment | | | (8,645 | ) | | | (16,794 | ) | | | (18,820 | ) | Cash received on sale of property and equipment | | | 92 | | | | 329 | | | | 3,061 | | Cash received on sale of assets held for sale | | | 1,565 | | | | 6,346 | | | | - | | Acquisitions, net of cash acquired | | | - | | | | (151 | ) | | | (4,310 | ) | Restricted cash | | | 5,444 | | | | (285 | ) | | | (5,390 | ) | Net cash (used in) provided by investing activities of continuing operations | | | (1,544 | ) | | | 2,016 | | | | 86,382 | | Net cash used in investing activities of discontinued operations | | | - | | | | - | | | | (2,861 | ) | Cash (used in) provided by investing activities | | | (1,544 | ) | | | 2,016 | | | | 83,521 | | Financing activities | | | | | | | | | | | | | Payments on lines of credit | | | - | | | | - | | | | (25,000 | ) | Proceeds from notes payable | | | 1,097 | | | | - | | | | - | | Proceeds from equipment financing | | | - | | | | - | | | | 209 | | Principal payments on debt and capital leases | | | (5,282 | ) | | | (7,177 | ) | | | (22,626 | ) | Payment of shareholder advances | | | - | | | | - | | | | (2,000 | ) | Proceeds from exercise of stock options | | | - | | | | 1 | | | | - | | Taxes paid related to income tax withheld on settlement of equity awards | | | (50 | ) | | | (274 | ) | | | - | | Net cash used in financing activities of continuing operations | | | (4,235 | ) | | | (7,450 | ) | | | (49,417 | ) | Net cash provided by financing activities of discontinued operations | | | - | | | | - | | | | (430 | ) | Cash used in financing activities | | | (4,235 | ) | | | (7,450 | ) | | | (49,847 | ) | | | | | | | | | | | | | | Net decrease in cash and cash equivalents | | | (14,232 | ) | | | (39,954 | ) | | | (9,089 | ) | Cash and cash equivalents at the beginning of the period | | | 21,465 | | | | 61,419 | | | | 70,508 | | Cash and cash equivalents at the end of the period | | $ | 7,233 | | | $ | 21,465 | | | $ | 61,419 | | | | | | | | | | | | | | | Supplemental Cash Flow Information | | | | | | | | | | | | | Cash paid for interest (including discontinued operations) | | $ | 150 | | | $ | 370 | | | $ | 4,253 | | Cash received for interest (including discontinued operations) | | $ | 9 | | | $ | 41 | | | $ | 75 | | Cash paid for income taxes | | $ | 51 | | | $ | 316 | | | $ | 88 | | Notes payable issued or assumed on acquisitions (continuing operations) | | $ | - | | | $ | - | | | $ | 1,121 | | Note payable related to insurance financing | | $ | 1,097 | | | $ | 2,634 | | | $ | 2,732 | | Stock issued to purchase property and to settle liabilities (continuing operations) | | $ | - | | | $ | - | | | $ | 37 | | Property received as payment on accounts receivable | | $ | - | | | $ | - | | | $ | 650 | |
| | 2015 | | | 2014 | | Operating activities | | | | | | | Net loss | | $ | (57,590 | ) | | $ | (46,808 | ) | Adjustments to reconcile net loss to cash used in operating activities: | | | | | | | | | Net loss from discontinued operations, net of tax | | | 46,264 | | | | 40,310 | | Depreciation and amortization | | | 1 | | | | - | | Accounts receivable | | | 2,249 | | | | - | | Accounts payable, accrued expense and other current liabilities | | | (669 | ) | | | 1,803 | | Other assets and non-current assets | | | (561 | ) | | | 6 | | Net cash used in operating activities of continuing operations | | | (10,306 | ) | | | (4,689 | ) | Net cash used in operating activities of discontinued operations | | | (6,635 | ) | | | (3,764 | ) | Cash used in operating activities | | | (16,941 | ) | | | (8,453 | ) | Investing activities | | | | | | | | | Purchases of property and equipment | | | (27 | ) | | | - | | Restricted cash | | | (318 | ) | | | - | | Net cash used in investing activities of continuing operations | | | (345 | ) | | | - | | Net cash provided by (used in) investing activities of discontinued operations | | | 38,177 | | | | (1,544 | ) | Cash provided by (used in) investing activities | | | 37,832 | | | | (1,544 | ) | Financing activities | | | | | | | | | Principal payments on debt | | | (2,867 | ) | | | (5,282 | ) | Proceeds from debt issuances | | | - | | | | 1,097 | | Proceeds from line of credit, net of issuance costs | | | 40,485 | | | | - | | Payments on line of credit | | | (40,485 | ) | | | - | | Taxes paid related to income tax withheld on settlement of equity awards | | | - | | | | (50 | ) | Net cash used in financing activities of continuing operations | | | (2,867 | ) | | | (4,235 | ) | Net cash used in financing activities of discontinued operations | | | (29 | ) | | | - | | Cash used in financing activities | | | (2,896 | ) | | | (4,235 | ) | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 17,995 | | | | (14,232 | ) | Cash and cash equivalents at the beginning of the period (1) | | | 7,233 | | | | 21,465 | | Cash and cash equivalents at the end of the period (1) | | $ | 25,228 | | | $ | 7,233 | | | | | | | | | | | Supplemental Cash Flow Information | | | | | | | | | Cash paid for interest (including discontinued operations) | | $ | 351 | | | $ | 150 | | Cash received for interest (including discontinued operations) | | $ | - | | | $ | 9 | | Cash paid for income taxes (including discontinued operations) | | $ | 19 | | | $ | 51 | | Proceeds on note payable related to insurance financing | | $ | 1,789 | | | $ | 1,097 | | Payments on note payable related to insurance financing | | $ | 2,559 | | | $ | - | |
(1) | The December 31, 2014 cash is included in current assets of discontinued operations in the consolidated balance sheet. |
See Accompanying Notes to Consolidated Financial Statements SWISHER HYGIENE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 — OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principal Operations On August 13, 2015, Swisher Hygiene Inc. announced that it had agreed to sell the stock of its wholly owned U.S. subsidiary Swisher International, Inc. and other assets relating to Swisher Hygiene Inc.'s U.S. operations, which comprise all of the Company’s remaining operating interests, to Ecolab Inc ("Ecolab"). We refer to the transaction pursuant to the purchase agreement between the Company and Ecolab dated August 12, 2015 as the "Sale Transaction." At closing, Ecolab paid the closing purchase price of $40.5 million, less a $2.0 million holdback to address working capital and other adjustments in accordance with the agreement governing the Sale Transaction. The net proceeds were adjusted by the following items subsequent to closing: $0.2 million receivable for the final adjusted cash balance, $2.0 million of transaction costs for consulting and legal fees, and the $0.9 million purchased cash balance, net of $0.2 million debt assumed. In the Sale Transaction, the Company retained certain debt and liabilities as set forth in the purchase agreement governing the sale. The sale was approved at the Annual Meeting of Stockholders on October 15, 2015, and the sale was completed on November 2, 2015, with an effective date of November 1, 2015. Subsequent to the Sale Transaction, it was determined the $2.0 million holdback would be paid to the Company without any adjustment for working capital. At December 31, 2015, the $2.2 million amount in accounts receivable on the consolidated balance sheet is due from Ecolab and includes the $2.0 million holdback plus $0.2 million final cash adjustment. The $2.0 million holdback was received from Ecolab in January 2016. As a result of the Sale Transaction a loss of $2.6 million was recorded after the $22.6 million impairment charge was recognized in the quarter ended September 30, 2015, and is included in discontinued operations in the consolidated statement of operations and comprehensive loss. See Note 2, "Discontinued Operations and Assets Held for Sale," and Note 3, "Goodwill and Other Intangible Assets" for a further description of the $2.6 million loss on sale and the $22.6 million impairment charge. In the Sale Transaction, the Company retained certain debt and liabilities as set forth in the purchase agreement governing the sale. Swisher Hygiene Inc. will no longer have any continuing involvement with the operations or cash flows of Swisher International, Inc., and as a result, Swisher Hygiene Inc. has presented the operations of Swisher International, Inc. as discontinued operations for the current and prior years. Prior to the Sale Transaction, our principal executive offices were located at 4725 Piedmont Row Drive, Suite 400, Charlotte, North Carolina, 28210. Swisher Hygiene Inc. and its wholly-owned subsidiaries (the “Company” or “we” or “our”) provideprovided essential hygiene and sanitizing solutions that includeincluded cleaning and sanitizing chemicals, restroom hygiene programs and a full range of related products and services. We sellsold consumable products such as detergents, cleaning chemicals, soap, paper, water filters and supplies, together with the rental and servicing of dish machines and other equipment for the dispensing of those products as well as additional services such as the cleaning of facilities. We serveserved customers in a wide range of end-markets, with a particular emphasis on the foodservice, hospitality, retail, and healthcare industries. During 2011 and most of 2012, we operated in two segments: (i) Hygiene and (ii) Waste. As a result of the sale of the Waste segment in November 2012, we currently operate in one business segment, Hygiene, and the Company has applied discontinued operations accounting treatment and disclosures for this transaction. See Note 2 "Discontinued Operations and Assets Held for Sale" for further information.
Our principal executive offices are located at 4725 Piedmont Row Drive, Suite 400, Charlotte, North Carolina, 28210. As of December 31, 2014, we have company owned operations and one remaining franchise operation located throughout North America and we have entered into nine Master License Agreements covering the United Kingdom, Portugal, the Netherlands, Singapore, the Philippines, Taiwan, Korea, Hong Kong/Macau/China, and Mexico. The financial information about our geographical areas is included in Note 18, “Geographic Information” to the Notes to the Consolidated Financial Statements.
Merger
On August 17, 2010, Swisher International, Inc. (“Swisher International”) entered into a merger agreement under which all of the outstanding common shares of Swisher International were exchanged for common shares of CoolBrands International Inc. (“CoolBrands”), and Swisher International became a wholly-owned subsidiary of CoolBrands (the “Merger”). Immediately before the Merger, CoolBrands completed its redomestication to Delaware from Ontario, Canada and became Swisher Hygiene Inc. The Merger was completed on November 2, 2010. After the Merger, the shareholders of CoolBrands held shares of Swisher Hygiene Inc. common stock.
Going Concern
Our consolidated financial statements were prepared on a going concern basis in accordance with U.S. GAAP. The going concern basis of presentation assumes that we will continue in operation for the next twelve months and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from our inability to continue as a going concern. The Company has suffered recurring losses from operations and has not generated positive cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. In order for us to continue operations beyond the next twelve months and be able to discharge our liabilities and commitments in the normal course of business, we must do some or all of the following: (i) improve operating results through improved customer retention, profitable organic revenue growth, and continued improvements in cost efficiencies; (ii) sell additional non-core or non-essential assets; (iii) raise additional equity; or (iv) obtain additional financing through debt. There can be no assurance that we will be able to improve operating results or obtain additional funds by selling additional non-core or non-essential assets, raising additional equity or obtaining additional financing when needed or that such funds, if available, will be obtainable on terms satisfactory to us.
If we are not able to improve operating results or obtain additional funds by selling additional non-core or non-essential assets, raising additional equity or obtaining additional financing, material adverse events may occur including, but not limited to: 1) a reduction in the nature and scope of our operations, 2) our inability to fully implement our current business plan and 3) defaults under the Credit Facility. There can be no assurances that we will be able to successfully improve our liquidity position. Our consolidated financial statements do not reflect any adjustments that might result from the adverse outcome relating to this uncertainty.
Basis of Presentation and Principles of Consolidation Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications, including those described further in Note 4, “Prior Period Reclassification,2, “Discontinued Operations and Assets Held for Sale,” have been made to prior year amounts for consistency with the current period presentation. Financial information, other than share and per share data, is presented in thousands of dollars. On June 3, 2014, a one-for-ten reverse split of the Company's issued and outstanding common stock, $0.001 par value per share, became effective ("Reverse Stock Split"). Trading of the common stock on a post-Reverse Stock Split adjusted basis began at the open of business on the morning of June 3, 2014. All historic share and per share information, including loss per share, in this Form 10-K have been retroactively adjusted to reflect the Reverse Stock Split. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements. Actual results could differ from those estimates and such differences could affect the results of operations reported in future periods. Segments We operatePrior to the Sale Transaction, we operated in one business segment, the manufacturing, distribution and delivery of hygiene and sanitizing services, products and solutions. We definedefined business segments as components of an organization for which discrete financial information iswas available and operating results arewere evaluated on a regular basis by the chief operating decision maker (“CODM”) in order to assess performance and allocate resources. Our CODM iswas the Company’s President and Chief Executive Officer. Characteristics of our organization which were relied upon in making this determination includeincluded the similar nature of the products and services we sell,sold, the functional alignment of our organizational structure, and the reports that arewere regularly reviewed by the CODM for the purpose of assessing performance and allocating resources. Previously we operated in two segments. See Note 2, “Discontinued Operations and Assets Held for Sale.”
Cash Equivalents The Company considers all cash accounts and all highly liquid short term investments purchased with an original maturity of three months or less at date of purchase to be cash equivalents. As of December 31, 20142015 and 2013,2014, the Company did not have any investments with maturities greater than three months. Restricted Cash Restricted cash at December 31, 2015 consists of an account with a maturity of July 3, 2016 to secure a workers’ compensation letter of credit. Restricted cash at December 31, 2014 consists of amounts held in a collateral account to secure purchase card balances and electronic cash transfers.transfers and is included in the current assets of discontinued operations in the consolidated balance sheet. Accounts Receivable Accounts receivable at December 31, 2015 relate to receivable amounts related to the Sale Transaction. Prior to the Sale Transaction, accounts receivable principally consistconsisted of amounts due from customers for product sales and services. Accounts receivable arewere reported net of an allowance for doubtful accounts (“allowance”) and interest iswas generally not charged to customers on delinquent balances. The allowance iswas management’s best estimate of uncollectible amounts and iswas based on a number of factors, including overall credit quality of customers, the age of outstanding customer balances, historical write-off experience and specific customer account analysis that projects the ultimate collectability of the outstanding balances. When accounts receivable amounts arewere considered uncollectible, the amounts arewere written-off against the allowance for doubtful accounts. The allowance was $1.0 millionzero and $2.0$1.0 million at December 31, 2015 and 2014, and 2013, respectively. The December 31, 2014 amount is included in the assets of discontinued operations in the consolidated balance sheet. Inventory Inventory consistsPrior to the Sale Transaction, inventory consisted of purchased items, materials, direct labor, and other manufacturing related overhead and iswas stated at the lower of cost or market determined using the first in-first out costing method. The Company routinely reviewsreviewed inventory for excess and slow moving items as well as for damaged or otherwise obsolete items and for items selling at negative margins. When such items arewere identified, a reserve iswas recorded to adjust their carrying value to their estimated net realizable value. The reserve was $0.8 millionzero and $0.9$0.8 million at December 31, 2015 and 2014, and 2013, respectively.
Assets Held for Sale
We record net assets held for sale in accordance with Accounting Standards Codification ("ASC") 360 "Property, Plant, and Equipment" at the lower of carrying value or fair value. Fair value The December 31, 2014 amount is based on the estimated sales price, less selling costs, of the assets. Estimates of the net sales proceeds are based on a number of factors including standard industry multiples of revenues or operating metrics, and the status of ongoing sales negotiations and asset purchase agreements where available. Our estimates of fair value are regularly reviewed and subject to changes based on market conditions, changesincluded in the customer baseassets of discontinued operations in the operations or routes and our continuing evaluation as to the facility's acceptable sale price. No depreciation or amortization expense is recorded related to the assets held for sale. As described further below and in Note 9, “Fair Value Measurements,” assets held for sale are measured using Level 3 inputs.consolidated balance sheet.
Property and Equipment At December 31, 2015, property and equipment consisted of computer software, which is being depreciated using the straight-line method over 1.5 years. A shorter life is being used for the computer software due to the uncertainty of the useful life of the software. Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation Prior to the Sale Transaction, depreciation and amortization iswas provided using the straight-line method over the estimated useful lives of individual assets or classes of assets as follows: | | Years | | Items in service | | 2 – 7 | | Equipment, laundry facility equipment and furniture | | 3 - 20 | | Vehicles | | 5 | | Computer equipment | | 3 | | Computer software | | 3 - 7 | | Building and leasehold improvements | | 1 - 40 | |
Items in service consistconsisted of various systems that dispensedispensed the Company’s cleaning and sanitizing products, linens, dish machines and dust control products. Included in the capitalized cost of items in service arewere costs incurred to install certain equipment for customer locations under long-term contracts. These costs includeincluded labor, parts and supplies. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. The Company capitalizescapitalized certain costs incurred during the application development stage associated with the development of new software products for internal use. Research and development costs in the preliminary project stage arewere expensed. Internal and external training costs and maintenance costs in the post-implementation operation stage arewere also expensed. Capitalized software costs arewere amortized over the estimated useful lives of the software commencing upon operational use. Purchase Accounting for Business Combinations The Company accountsaccounted for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference iswas recorded as goodwill. Adjustments may behave been made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surfacesurfaced during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration iswas recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value arewere recorded through earnings each reporting period. Transactions that occuroccurred in conjunction with or subsequent to the closing date of the acquisition arewere evaluated and accounted for based on the facts and substance of the transactions. Goodwill Goodwill is not amortized but rather tested for impairment at least annually. The Company teststested goodwill for impairment annually during the fourth quarter of each fiscal year. Goodwill iswas also tested for impairment between annual tests if an event occursoccurred or circumstances changechanged that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Impairment testing for goodwill iswas done at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. The Company has concluded prior to the Sale Transaction that it hashad one reporting unit. When testing goodwill for impairment, the Company may assessassessed qualitative factors to determine whether it iswas more likely than not (that is, a likelihood of more than 50 percent) that the Company’s fair value iswas less than its carrying amount, including goodwill. Alternatively, the Company may bypasshave bypassed this qualitative assessment and performperformed step 1 of the two-step goodwill impairment test. This step requiresrequired the determination of the fair value of the reporting unit. If we performperformed step 1 and the carrying amount of the reporting unit exceedsexceeded its fair value, we would performhave performed step 2 to measure such impairment. Determining fair value includesincluded the use of significant estimates and assumptions. Management utilizesutilized an income approach, specifically the discounted cash flow technique as a means for estimating fair value. This discounted cash flow analysis requiresrequired various assumptions including those about future cash flows, customer growth rates and discount rates. Expected cash flows arewere based on historical customer growth, including attrition, future strategic initiatives and continued long-term growth of the business. The discount rates used for the analysis reflectreflected a weighted average cost of capital based on industry and capital structure adjusted for equity risk and size risk premiums. These estimates can becould have been affected by factors such as customer growth, pricing, and economic conditions that can becould have been difficult to predict. During the second quarter of 2014, and the fourth quarter of 2013, in conjunction with its impairment test, the Company recorded a goodwill impairment charge of $5.8 million, and $93.2 million, respectively,is included in discontinued operations in the consolidated statement of operations and comprehensive loss as further discussed in Note 5,3, “Goodwill and Other Intangible Assets”. Other Intangible Assets Identifiable intangible assets includeincluded customer relationships, non-compete agreements, trade names and trademarks, and formulas. The fair value of these intangible assets at the time of acquisition iswas estimated based upon various valuation techniques including replacement cost and discounted future cash flow projections. Customer relationships arewere amortized on a straight-line basis over the expected average life of the acquired accounts, which iswas typically five to ten years based upon a number of factors, including historical longevity of customers and contracts acquired and historical retention rates. The non-compete agreements arewere amortized on a straight-line basis over the term of the agreements, typically not exceeding five years. Formulas arewere amortized on a straight-line basis over their estimated useful life of twenty years. The Company reviewsreviewed the recoverability of these assets if events or circumstances indicateindicated that the assets may behave been impaired and periodically reevaluates the estimated remaining lives of these assets. Trade names and trademarks arewere considered to be indefinite lived intangible assets unless specific evidence existsexisted that a shorter life iswas more appropriate. Indefinite lived intangible assets arewere tested, at a minimum, on an annual basis, using a discounted cash flow approach, or sooner whenever events or changes in circumstances indicateindicated that an asset may be impaired. During the third quarter of 2015, as a result of the Sale Transaction, the Company performed an impairment analysis of its intangible assets in accordance with ASC 350, Intangible-Goodwill and Other, as of August 31, 2015. Based on the analysis performed, it was determined that an impairment of the Company’s intangible assets had occurred, resulting in an impairment charge of $10.0 million, which is reported as part of discontinued operations in the consolidated statement of operations and comprehensive loss as discussed in Note 3, "Goodwill and Other Intangible Assets." Long-Lived Assets Fixed assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets, as previously discussed. Foreign Currency Translation
All During the third quarter of 2015, as a result of the Sale Transaction, the Company performed an impairment analysis of its long-lived assets and liabilitiesin accordance with ASC 360-10, Impairment or Disposal of our CanadianLong-Lived Assets, as of August 31, 2015. Based on the analysis performed, it was determined that an impairment of the Company’s fixed assets had occurred, resulting in an impairment charge of $12.6 million, which is reported as part of discontinued operations are translated into U.S. dollars usingin the exchange rates in effect at the balance sheet date andconsolidated statement of operations items are translated using the average exchange rates throughout the period. The translation adjustment is presented and comprehensive loss as a component of accumulated other comprehensive (loss) income. The loss was primarily due to unfavorable conversion rates.discussed in Note 5, "Property and Equipment."
Financial Instruments The Company’s financial instruments, which may expose the Company to concentrations of credit risk, include cash and cash equivalents and accounts receivables. The Company maintains cash deposits with major banks, which from time to time may exceed insured limits. The possibility of loss related to the financial condition of major banks is considered minimal. The Company’s accounts receivable balance is composed of numerous customers of varying sizes in diverse industries and geographies. This fact, as well as the practice of establishing reasonable credit limits mitigates credit risk. Based on historical trends and experiences, the allowance for doubtful accounts is adequate to cover potential credit risk losses. The carrying amounts of cash and cash equivalents accounts receivable and accounts payablereceivable approximate fair value due to the short maturity of these instruments. The fair value of the Company’s debt iswas estimated based on the current borrowing rates available to the Company for bank loans with similar terms and maturities and approximatesapproximated the carrying value of these liabilities. Certain convertible promissory notes arewere recorded at fair value during 2014 and 2013 as further described in Note 8,7, "Fair Value Measurements.” Revenue Recognition RevenuePrior to the Sale Transaction, revenue from product sales and service iswas recognized when the product iswas delivered to the customer or when services arewere performed, including product and service sales made under multiple deliverable agreements, which outline the pricing of products and the preferred frequency of delivery. Deliverables under these pricing arrangements arewere considered to be separate units of accounting, as defined by ASC 605-25, Revenue Recognition – Multiple-Element Arrangement, and due to the nature of the Company’s business, the timing of the delivery of products and performance of service iswas concurrent and ongoing and there arewere no contingent deliverables.undelivered elements. Franchise and other revenue include product sales, royalties and other fees charged to franchisees in accordance with the terms of their franchise agreements. Royalties and fees arewere recognized when earned and product sales arewere recognized as the product iswas delivered.
The Company’s sales policies provide for limited rights of return and, during the fiscal years 2014, 2013,2015 and 2012,2014, product returns were insignificant. The Company recordsrecorded estimated reductions to revenue for sales returns and for customer programs and incentive offerings, including pricing arrangements, rebates, promotions and other volume-based incentives at the time the sale iswas recorded. Stock Based Compensation The Company measuresmeasured and recognizesrecognized all stock based compensation at fair value at the date of grant and recognizesrecognized compensation expense over the requisite service period for awards expected to vest. Determining the fair value of stock based awards at the grant dates requiresrequired judgment, including estimating the share volatility, the expected term the award will be outstanding, and the amount of the awards that are expected to be forfeited. The Company utilizesutilized the Black-Scholes option pricing model to determine the fair value for stock options on the date of grant. Effective February 19, 2016, the Swisher Hygiene Inc. 2010 Stock Incentive Plan was terminated by the Board of Directors. All stock options and restricted stock units were cancelled before the plan was terminated. See Note 10, “Equity Matters” for further information regarding the 2010 Stock Incentive Plan. Freight Costs Shipping and handling costs for freight expense on goods shipped arewere included in cost of sales. Shipping and handling costs for freight expense on goods received arewere capitalized to inventory where they arewere relieved to cost of sales when the product iswas sold. Income Taxes Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that deferred tax assets will not be realized. The Company’s policy is to evaluate uncertain tax positions under ASC 740-10, Income Taxes. As of December 31, 20142015 and 2013,2014, and for the threetwo years ended December 31, 2014,2015, the Company has not identified any uncertain tax positions requiring recognition in the accompanying consolidated financial statements. The Company includes interest and penalties accrued in the consolidated financial statements as a component of interest expense. No significant amounts were required to be recorded for the threetwo year period ended December 31, 2014.2015. Loss per Common Share Basic net loss from continuing operations and basic net loss from discontinued operations attributable to common stockholders per share is computed by dividing the applicable net loss by the weighted average number of common shares outstanding during the period. Vested restricted stock units, of 0.1 million which have been deferred, are included in this weighted average number of common shares calculation. Diluted net loss from continuing operations per share was the same as basic net loss from continuing operations attributable to common stockholders per share for all periods presented, since the effects of any potentially dilutive securities are excluded as they are antidilutive due to the Company’s net losses. Diluted net earnings per share from discontinued operations was calculated in the same manner as diluted net loss from continuing operations per share in accordance with ASC 260, Earnings per Share. Comprehensive Loss Comprehensive loss includes net loss, foreign currency translation adjustments and an employee benefit plan adjustment consisting of changes to unrecognized pension actuarial gains and losses, net of tax. Fair Value Measurements The Company determines the fair value of certain assets and liabilities based on assumptions that market participants would use in pricing the assets or liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, or the “exit price.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and gives precedence to observable inputs in determining fair value. An instrument’s level within the hierarchy is based on the lowest level of any significant input to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The following is a discussion of the levels established for each input. Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Instruments classified as Level 1 consist of financial instruments such as listed equities and fixed income securities. Level 2: Inputs other than quoted prices, included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. These are inputs for which there is no market data available or observable inputs that are adjusted using Level 3 assumptions. Pension Plan An acquired subsidiary of CoolBrands International Inc. (“CoolBrands”) maintained a defined benefit pension plan ("the Plan") covering approximately 90 employees.employees and is included in the continuing operations. Subsequent to the acquisition by Coolbrandsof CoolBrands in 2000, all future participation and all benefits under the Plan were frozen. The Plan provides retirement benefits based primarily on employee compensation and years of service up to the date of acquisition. The Company recognizes in its continuing operations consolidated balance sheet the overfunded or underfunded status of the Plan measured as the difference between the fair value of Plan assets and the benefit obligation. The Company recognizes as a separate component of the continuing operations comprehensive loss the actuarial gains and losses that arise during the period that are not recognized as components of net periodic benefit cost. The Company measures the Plan assets and the Plan obligations as of December 31 and discloses additional information in the Notes to Consolidated Financial Statements about certain effects on net periodic benefit cost in the upcoming fiscal year that arise from delayed recognition of the actuarial gains and losses. The calculation of net periodic benefit cost and the corresponding net liability requires the use of critical assumptions, including the expected long-term rate of return on Plan assets and the assumed discount rate. Changes in these assumptions can result in different expense and liability amounts. Net periodic benefit cost increases as the expected rate of return on Plan assets decreases. Future changes in Plan asset returns, assumed discount rates and other factors related to the participants in the Company’s Plan will impact the Company’s future net periodic benefit cost and liabilities. The Company cannot predict with certainty what these factors will be in the future however they are not expected to have a material effect on the Company’s operating results, financial position or cash flows. The Company sent a notice of plan termination to participants in December 2015 and expects to terminate the Plan in 2016. In connection with the termination, the Company will fund the Plan so there will be no minimum regulatory funding requirement in 2016. Since the Company will fund the total benefit obligation, there will be no expected benefit payments under the Plan in future years. Newly Issued Accounting Pronouncements OnIn April, 10, 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.Entity. The amendments in this accounting standard raiseASU raises the threshold for a disposal to qualify as a discontinued operation and requires newexpanded disclosures of bothabout discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, expenses and certain othercash flows of discontinued operations. Under the new guidance, the disposal of a component or group of components of a business will be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Early adoption is permitted, but only for disposals that dohave not meet the definition of a discontinued operation.been reported in financial statements previously issued. This accounting standard update is effective for annual periods beginning on or after December 15, 2014 and related interim periods, with early adoption allowed. This standard has been adopted by the Company and the impact is incorporated in the Company’s consolidated financial statements and disclosures. In August, 2015, the FASB issued ASU No. 2015-14 which updated previously issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU is intended to clarify the principles for recognizing revenue by providing a more robust framework for addressing revenue issues; improving comparability of revenue recognition practices; and providing more useful information to users of financial statements through improved revenue disclosure requirements. The updated ASU changed the effective date of the previously issued ASU, and made it effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this standard and planshas elected to not adopt thisthe standard on the stated effective date in fiscal year 2015.early. On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This accounting standard creates common revenue recognition guidance for U.S. GAAP and IFRS. The guidance also requires improved disclosures to help users of the financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognized. This accounting standard update is effective for annual reporting periods beginning after December 15, 2016, and related interim periods. Early adoption is not permitted. The Company is currently evaluating the impact of this standard.
In August 2014, the FASB issued ASU Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) (Topic 718), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU Update No. 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and to provide related footnote disclosures. The new requirements are effective for the annual periods ending after December 15, 2016, and for interim periods and annual periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of this standard and has elected to not adopt the standard early. In April 2015 and August 2015, the FASB issued ASU 2015-03 (ASC Subtopic 835-30), Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs and ASU 2015-15 (ASC Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements- Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, respectively. The ASUs require that debt issuance costs related to a recognized debt liability, with the exception of those related to line-of-credit arrangements, be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The amendments in these ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements and disclosures. In September 2015, the FASB issued ASU 2015-16 (ASC Topic 805), Business Combinations Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this update require that an acquirer recognize measurement period adjustments in the period in which the adjustments are determined. The income effects of such measurement period adjustments are to be recorded in the same period’s financial statements but calculated as if the accounting had been completed as of the acquisition date. The impact of measurement period adjustments to earnings that relate to prior period financial statements are to be presented separately on the income statement or disclosed by line item. The amendments in this update are for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted for public business entities for reporting periods for which financial statements have not yet been issued. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements and disclosures. In November 2015, the FASB issued ASU 2015-17 (ASC Topic 740), Income Taxes Balance Sheet Classification of Deferred Taxes. The amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted by all entities as of the beginning of an interim or annual reporting period. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements and disclosures. In January 2016, the FASB issued ASU 2016-01 (ASC Subtopic 825-10), Financial Instruments- Overall Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU require entities to measure all investments in equity securities at fair value with changes recognized through net income. This requirement does not apply to investments that qualify for the equity method of accounting, to those that result in consolidation of the investee, or for which the entity meets a practicability exception to fair value measurement. Additionally, the amendments eliminate certain disclosure requirements related to financial instruments measured at amortized cost and add disclosures related to the measurement categories of financial assets and financial liabilities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for only certain portions of the ASU. The Company is in the process of assessing the impact, if any, on its consolidated financial statements. NOTE 2 — DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE Discontinued Operations – Waste Segment On November 15, 2012,As described in Note 1, "Operations and Summary of Significant Accounting Policies," on August 13, 2015, Swisher Hygiene Inc. announced that it had agreed to sell the stock of its wholly owned U.S. subsidiary Swisher International, Inc. and other assets relating to Swisher Hygiene Inc.'s U.S. operations, which comprise all of the Company’s remaining operating interests, to Ecolab. At closing, Ecolab paid the closing purchase price of $40.5 million, less a $2.0 million holdback to address working capital and other adjustments in accordance with the agreement governing the Sale Transaction. The net proceeds were adjusted by the following items subsequent to the closing: $0.2 million receivable for the final adjusted cash balance, $2.0 million of transaction costs for consulting and legal fees, and the $0.9 million purchased cash balance, net of $0.2 million debt assumed. In the Sale Transaction, the Company retained certain debt and liabilities as set forth in the purchase agreement governing the sale. The sale was approved at the Annual Meeting of Stockholders on October 15, 2015, and the sale was completed on November 2, 2015, with an effective date of November 1, 2015. Subsequent to the Sale Transaction, it was determined the $2.0 million holdback would be paid to the Company without any adjustment for working capital. At December 31, 2015, the $2.2 million amount in accounts receivable on the consolidated balance sheet is due from Ecolab and includes the $2.0 million holdback plus $0.2 million final cash adjustment. The $2.0 million holdback was received from Ecolab in January 2016.
As a stock saleresult of Choice,the Sale Transaction a loss of $2.6 million was recorded after the impairment charges described below were recognized in the quarter ended September 30, 2015, and other acquired businesses, including Lawson Sanitation LLC, Central Carting Disposal,is included in discontinued operations in the consolidated statement of operations and comprehensive loss. Swisher Hygiene Inc. no longer has any continuing involvement with the operations or cash flows of Swisher International, Inc., FSR Transporting and Crane Services,as a result, Swisher Hygiene Inc. has presented the operations of Swisher International, Inc. as discontinued operations for the current and prior years. In accordance with the criteria specified in ASC 205 Presentation of Financial Statements and ASC 360, Property, Plant and Equipment, these related assets and liabilities are reported as assets of discontinued operations in the consolidated balance sheet. As a result of the Sale Transaction, the Company performed an impairment analysis of its long-lived assets in accordance with ASC 360-10,Impairment or Disposal of Long-Lived Assets, and an impairment analysis on intangible assets in accordance with ASC 350, Intangible-Goodwill and Other, as of August 31, 2015. Based on the analysis performed, it was determined that comprisedan impairment of the Waste segment to Waste Services of Florida, Inc. for $123.3 millionCompany’s fixed assets and intangible assets had occurred, resulting in a gainan impairment charge of $13.8$12.6 million netand $10.0 million, respectively, which is reported as part of tax. The Company applied discontinued operations accounting treatmentin the consolidated statement of operations and disclosures related to this transaction. comprehensive loss as discussed in Note 3, "Goodwill and Other Intangible Assets." The stock purchase agreement stipulated customary purchase price adjustments related to closing balance sheet working capital targets and in addition, that $12.5 millionfollowing tables provide a reconciliation of the purchase price consideration would be reserved and held back in escrow by the purchaser ("the holdback amount") and paid subject to financial adjustments regarding defined long-termcarrying amounts of major classes of assets and 2012 third quarter EBITDA targets. Management recorded the holdback amountliabilities which are included in discontinued operations in the calculation of the gain on sale of the Waste segment and the amount is classified on theaccompanying consolidated balance sheet as "Accounts receivable due from sale of discontinued operations" at December 31, 2012. Proceeds from2014. At December 31, 2015, there were no remaining assets or liabilities of the holdback plus $0.1 million in working capital adjustments were received during the first half of 2013.discontinued operations. | | December 31, | | Assets of discontinued operations | | 2014 | | Current assets: | | | | Cash and cash equivalents | | $ | 7,233 | | Restricted cash | | | 231 | | Accounts receivable | | | 18,751 | | Inventory | | | 15,426 | | Deferred tax asset | | | 534 | | Other current assets | | | 1,615 | | Total current assets | | | 43,790 | | | | | | | Property and equipment | | | 37,037 | | Intangibles | | | 29,446 | | Other noncurrent assets | | | 1,812 | | Total noncurrent assets | | | 68,295 | | | | | | | Total Assets | | $ | 112,085 | |
Liabilities of discontinued operations | | | | Current liabilities: | | | | Accounts payable | | $ | 13,119 | | Accrued payroll and benefits | | | 2,893 | | Accrued expenses | | | 5,873 | | Short term obligations | | | 94 | | Total current liabilities | | | 21,979 | | | | | | | Deferred tax liabilities | | | 558 | | Long term obligations | | | 107 | | Other long term liabilities | | | 724 | | Total noncurrent liabilities | | | 1,389 | | | | | | | Total liabilities | | $ | 23,368 | |
The following table presents summarized operatingsummarizes the results for theseof discontinued operations for the fiscal years ended 2014, 2013December 31, 2015 and 2012.2014: | | Year Ended December 31, | | | | 2015 | | | 2014 | | Revenue | | $ | 142,713 | | | $ | 193,757 | | | | | | | | | | | Cost of sales | | | 66,684 | | | | 89,101 | | Route expense | | | 37,599 | | | | 50,595 | | Selling, general and administrative | | | 46,538 | | | | 62,905 | | Depreciation and amortization | | | 13,494 | | | | 21,216 | | Impairments | | | 22,807 | | | | 8,810 | | Loss on Sale Transaction | | | 2,615 | | | | - | | Other (income) expenses, net | | | (717 | ) | | | 1,529 | | Loss from discontinued operations | | | (46,307 | ) | | | (40,399 | ) | Income tax benefit | | | 43 | | | | 89 | | Net loss from discontinued operations | | $ | (46,264 | ) | | $ | (40,310 | ) |
| | 2014 | | | 2013 | | | 2012 | | Revenue | | $ | - | | | $ | - | | | $ | 60,874 | | Net (loss) income after taxes and 2012 gain on disposal of $13.8 million | | | - | | | | (2,516 | ) | | | 7,599 | |
Any corporate management overhead charged to the Waste segment in prior year filings has beenThe disposal groups mentioned below are included in continuingdiscontinued operations in the periods subsequent to the discontinuance as the overhead amounts are not expected to change as a result of the sale of the Waste segment. During fiscal year 2013, the Company incurred $2.5 million in expenses related to the discontinued operation as follows: $0.5 million increase to retained worker’s compensation liabilities and $2.0 million in legal fees and a settlement payment related to a contractual dispute involving one of the businesses sold that the Company accepted responsibility to resolve as a term of the sales agreement.Company’s consolidated financial statements.
Net cash of $2.1 million used in connection with discontinued operations for the twelve months ended December 31, 2014 principally represents payment for legal fees and the settlement of a contractual dispute that the Company accepted responsibility to resolve as a part of the sale of the Waste segment. For the twelve months ended December 31, 2013, net cash of $4.6 million used in connection with discontinued operations principally represents the payment of certain liabilities for severance and professional fees, previously accrued as a part of the sale, as well as cash payments related to retained worker’s compensation liabilities and litigation accruals. There were no cash inflows related to discontinued operations in 2014 or 2013.
Assets Held For Sale
During 2013, the Company commenced an active program to sell certain non-core assets and routes related to its linen and dust operations. Additionally, inIn 2014, the Company ceased operations at a linen processing plantplant. During March 2015, the Board of Directors of the Company approved a resolution to sell the Company’s remaining linen operation and in 2013 a chemical manufacturing plant was closed in connection withJuly 2015, the Company’s plant consolidation efforts. In accordance with ASC 360, Property, Plant and Equipment, these assets were classified as assets held forBoard of Directors approved the sale inof the Consolidated Balance Sheet and the asset balances were adjusted to the lower of historical carrying amounts or fair values. Canadian operations. During 2014, the Company updated its estimates of the fair value of certain linen routes and operations to reflect various events that occurred during the year. The cumulative impairment loss for the twelve months ended December 31, 2014 was $3.0 million and is included in other expense of discontinued operations in the in the consolidated statements of operations and comprehensive loss, of which $1.9 million was attributable to a reduction in the estimate of net sales proceeds for a linen processing operation. The factors driving the $1.9 million reduction were the cancellation notifications received during April and May 2014 from three major customers resulting in a significant loss of forecasted revenue; and the operation’s 2014 year-to-date loss which was in excess of the Company’s estimates. The asset fair value of this linen processing operation was written down to zero in the second quarter of 2014 and was closed during the fourth quarter of 2014. The Company recorded impairment charges for the twelve months ended December 31, 2013 of $6.4 million. Included in this charge is $3.1 million that was recorded during the fourth quarter of 2013 as follows: $2.0 million related to the Board of Director’s approval, on November 8, 2013, of additional assets to be disposed of and the resultant adjustment of these assets from net carrying value to fair value; $1.1 million impairment adjustments to existing assets held for sale to reflect reductions in the estimated fair value as a result of events that occurred during the fourth quarter which indicated that the estimated net selling prices will be less than anticipated at the end of the third quarter.
The Company completed the sale of the remaining linen operation on May 12, 2015 receiving $4.0 million in cash and notes receivable plus purchased accounts receivables, resulting in a gain of $0.9 million. The gain is included in other income of discontinued operations in the consolidated statement of operations and comprehensive loss. On August 4, 2015, the Company completed the sale of the Canadian operations for $2.6 million in cash and $0.1 million in respect of outstanding accounts payable, net of outstanding accounts receivable. The sale of the Canadian operations resulted in a gain on the sale of $1.4 million, which is included in other income of discontinued operations in the consolidated statement of operations and comprehensive loss. The Company completed several sales transactions during the twelve months ended December 31, 2014, which resulted in the net receipt of $1.6 million in cash and the remainder in receivables. A loss on these sales of $0.9 million was incurred and included a write-off of $0.6 million of the receivable balances. The receivable balances were primarily for contingent sales proceeds that were based on post-closing revenues of previously sold routes which were lower than estimated. The total loss of $0.8$0.9 million for the twelve months ended December 31, 2014, is included in “Otherother expense net”of discontinued operations in the condensed consolidated statementstatements of operations and comprehensive loss. The Company completed several sales transactions during the last half of 2013 totaling $6.3 million in net sales proceeds including $0.6 million in receivable balances that were contingent primarily upon 2014 revenues generated by certain of the sold assets during defined post-close periods. The resulting $0.2 million gain is included in “Other expense, net” in the consolidated statement of operations and comprehensive loss.
There were no assets held for sale as of December 31, 2014. The major classes of assets held for sale as of2014 and December 31, 2013 are as follows:2015. | | December 31, | | | | 2013 | | Property and equipment, net | | $ | 2,410 | | Goodwill | | | 1,272 | | Customer relationships, net | | | 833 | | Other, net | | | 5 | | Total | | $ | 4,520 | |
None of the disposal groups that could be classified as discontinued operations were material, individually or in the aggregate, to the Company’s consolidated financial statements and therefore these results were not separately classified in discontinued operations. The remaining portfolio of assets held for sale did not meet the criteria for discontinued operations as they did not represent operations and cash flows that are clearly distinguished, operationally and for financial reporting purposes consistent with the Company’s strategy of integrating these acquired assets into its existing business operations. Additionally, the Company anticipates maintaining continuing revenues with respect to a the majority of the sold routes and/or customers through the sale of chemical, paper and its other core hygiene and sanitizing products and services.
2013 Acquisitions
During fiscal year 2013, the Company acquired a franchise located in Ottawa, Canada for $0.2 million primarily in cash plus receivables, resulting in a $0.1 million addition to goodwill. This acquisition is immaterial to the Company’s consolidated financial statements and therefore supplemental pro-forma information is not presented.
2012 Acquisitions
The following table summarizes the Company’s 2012 acquisitions and the estimated aggregate fair values of the assets acquired and liabilities assumed at the date of acquisition:
| | 2012 | | Number of businesses acquired | | | 4 | | | | | | | Net assets acquired: | | | | | Accounts receivable and other assets | | $ | 263 | | Inventory | | | 86 | | Property and equipment | | | 2,085 | | Other intangibles | | | | | Customer relationships | | | 1,276 | | Non-compete agreements | | | 120 | | Trademarks | | | 130 | | Accounts payable and accrued expenses | | | (42 | ) | Total net assets acquired | | | 3,918 | | Goodwill | | | 1,550 | | Total purchase price | | | 5,468 | | Less: debt issued or assumed | | | (1,121 | ) | Less: issuance of shares | | | (37 | ) | Cash Paid | | $ | 4,310 | |
During 2012, the Company acquired four independent businesses and purchased the remaining non-controlling interest in one of its subsidiaries. The results of operations of these acquisitions have been included in the Company's consolidated financial statements and include $3.1 million in revenue and the related loss was insignificant to the Company's overall net loss from continuing operations. None of these acquisitions were significant individually or in the aggregate to the Company's consolidated financial results and therefore, supplemental pro forma financial information is not presented.
NOTE 4 — PRIOR PERIOD RECLASSIFICATION
In the first quarter of 2014, the Company began implementing a realignment of its field service and sales organization and as a result the primary function of certain job titles has shifted from primarily a sales, to a service focus. The additional service activities involve more frequent field visits to perform preventative maintenance, repairs, evaluation of product and service solutions and required inventory levels. This realignment of the field service and sales organization was implemented in stages during 2014. Payroll expense related to these job titles was historically classified within “Selling, general and administrative expenses” in the Consolidated Statement of Operations and Comprehensive Loss, based on the primary job focuses of sales and administration. Based on the changes in the job functions, the related payroll expense is classified within “Route expense”, which the Company defines as the employee costs incurred to provide service and deliver products to customers. To facilitate comparability between the periods presented in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the twelve months ended December 31, 2013 certain selling, general and administrative expenses have been reclassified to route expense to conform to the current period’s presentation which resulted in an $11.9 million increase in route expense and a $11.9 million decrease in selling, general and administrative expense. The reclassification for the twelve months ended December 31, 2012 resulted in a $12.5 million increase in route expense and a $12.5 million decrease in selling, general and administrative expense. There was no impact to loss from continuing operations, net loss or loss per share as a result of the 2013 and 2012 reclassifications.
NOTE 5 — GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets have beenwere recognized in connection with the Company’s acquisitions and substantially all of the balance iswas expected to be fully deductible for income tax purposes over 15 years. Changes in the carrying amount of goodwill during the yearsyear ended December 31, 2014 and 2013included in discontinued operations were as follows: | | 2014 | | | 2013 | | Gross balance- beginning | | $ | 5,821 | | | $ | 107,228 | | Additions related to acquisitions (Note 3) | | | - | | | | 150 | | Adjustment to the lower of carrying or fair market value for Assets Held for Sale (Note 2) | | | - | | | | (4,703 | ) | Reclassification of goodwill to Assets Held for Sale (Note 2) | | | - | | | | (2,790 | ) | Dispositions (Note 2) | | | - | | | | - | | | | | | | | | | | Gross balance – ending | | | 5,821 | | | | 99,885 | | Accumulated impairment loss | | | (5,821 | ) | | | (94,064 | ) | Net balance – ending | | $ | - | | | $ | 5,821 | |
| | 2014 | | Gross balance- beginning | | $ | 5,821 | | Impairment loss | | | (5,821 | ) | Net balance – ending | | $ | - | |
The Company’s accounting policy was to perform an annual goodwill impairment test in the fourth quarter or more frequently whenever events or circumstances indicated that goodwill or the carrying value of intangible assets may not be recoverable. On a quarterly basis, we monitormonitored the key drivers of fair value to detect the existence of indicators or changes that would warrant an interim impairment test for our goodwill and intangible assets. Due to a shortfall in sales compared to expectations in the quarter ended June 30, 2014, the Company elected to bypass the qualitative analysis step and proceed directly to step 1 of the goodwill impairment test. Step 1 of the goodwill impairment test was performed with the assistance of an independent valuation specialist using the discounted cash flow method (“DCF”.) Based on this analysis, it was determined that the Company’s net book value exceeded its fair value thereby necessitating the performance of step 2 of the goodwill impairment test. The decrease in estimated fair value was driven by lower actual revenue compared to 2014 projections. The growth rates for the second half of 2014 and the first half of 2015 were revised to reflect the lower revenue during the six months ended June 30, 2014. The effect of these revisions resulted in a loss of estimated fair value resulting in a write-off of the remaining goodwill balance with a non-cash impairment charge of $5.8 million during 2014. In connection with its 2013 fourth quarter evaluation2014, which is included in discontinued operations in the consolidated statement of goodwill, the Company elected to bypass the qualitative analysis stepoperations and proceed directly to step 1 of the goodwill impairment test. This decision was based largely on the results of the 2013 third quarter interim impairment test that indicated the Company’s goodwill was at high risk of impairment given the narrow difference identified between fair value and book value. It was determined that the Company’s net book value exceeded its fair value thereby necessitating the performance of step 2 of the goodwill impairment test. In performing Step 2 of the impairment test, with the assistance of valuation specialists, we compared the implied fair value of the reporting unit’s goodwill to its carrying value. This test resulted in a non-cash impairment charge of $93.2 million in 2013. The goodwill impairment can be attributed to the Company’s history of operating losses and continued deterioration of its stock price.comprehensive loss.
We believe the cash flow projections and valuation assumptions used were reasonable and consistent with market participants. The key variables that drivedrove our cash flows arewere customer growth and attrition and operational efficiencies. The terminal value growth rate assumption as well as the WACC rate both representrepresented additional key variables in the DCF model. The estimates and assumptions used are subject to uncertainty. Other Intangible Assets | | Weighted-average Amortization Period (Years) | | | Carrying Amount | | | Accumulated Amortization | | | Net | | | Weighted-average Amortization Period (Years) | | | Gross Carrying Amount | | | AccCumulated Amortization | | | Net Book Value | | At December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | Customer relationships | | | 8.9 | | | $ | 50,635 | | | $ | (27,838 | ) | | $ | 22,792 | | | 8.9 | | | $ | 50,635 | | | $ | (27,838 | ) | | $ | 22,797 | | Non-compete agreements | | | 4 | | | | 9,098 | | | | (8,032 | ) | | | 1,066 | | | 4 | | | | 9,098 | | | | (8,032 | ) | | | 1,066 | | Formulas | | | 20 | | | | 4,544 | | | | (767 | ) | | | 3,777 | | | 20 | | | | 4,544 | | | | (772 | ) | | | 3,772 | | Trademarks/ Trade names | | (A | ) | | | 2,151 | | | | (340 | ) | | | 1,811 | | | Trademarks/Trade names | | | (A) | | | | 2,151 | | | | (340 | ) | | | 1,811 | | Total | | | | | | $ | 66,428 | | | $ | (36,982 | ) | | $ | 29,446 | | | | | | | $ | 66,428 | | | $ | (36,982 | ) | | $ | 29,446 | | | | | | | | | | | | | | | | | | | | At December 31, 2013 | | | | | | | | | | | | | | | | | | Customer relationships | | | 8.9 | | | $ | 50,635 | | | $ | (22,060 | ) | | $ | 28,575 | | | Non-compete agreements | | | 4 | | | | 9,098 | | | | (6,380 | ) | | | 2,718 | | | Formulas | | | 20 | | | | 4,544 | | | | (545 | ) | | | 3,999 | | | Trademarks/ Trade names | | (A | ) | | | 2,059 | | | | (340 | ) | | | 1,719 | | | Total | | | | | | $ | 66,336 | | | $ | (29,325 | ) | | $ | 37,011 | | |
(A) Consist of indefinite lived and finite lived intangible assets. All of the other intangible assets at December 31, 2014 were related to the discontinued operations. As of December 31, 2015, there were no intangible assets remaining due to the Sale Transaction. The fair value of the customer relationships acquired iswere based on future discounted cash flows expected to be generated from those customers. These customer relationships will bewere amortized on a straight-line basis over five to ten years, which iswas primarily based on historical customer attrition rates. The fair value of the non-compete agreements will bewere amortized on a straight-line basis over the length of the agreements, typically with terms of five years or less. The fair value of formulas iswas amortized on a straight-line basis over twenty years. As of December 31, 2012, all trademarks and trade names are considered indefinite lived intangibles. During 2013, approximately $2.5The Company performed an assessment of its proprietary chemical formulas in the quarter ended June 30, 2015 because of initiatives throughout the organization to reduce the number of active stock keeping units (“SKUs”). Upon completion of the assessment and impairment testing, it was determined that the fair value of formulas was lower than the net book value, resulting in an impairment charge of $0.2 million for the quarter ended June 30, 2015, which is included in customer relationshipsdiscontinued operations in the consolidated statement of operations and non-compete assets were reclassified to assets held for sale as further discussedcomprehensive loss.
As described above in Note 3,2, “Discontinued Operations and Assets Held for Sale.Sale,” Thethe Sale Transaction was completed on November 2, 2015, with an effective date of November 1, 2015. As a result of the Sale Transaction, the Company recorded $0.6performed an impairment analysis of its long-lived assets in accordance with ASC 360-10, Impairment or Disposal of Long-Lived Assets, and ASC 350, Intangible-Goodwill and Other, as of August 31, 2015. Based on the analysis performed, it was determined that an impairment of the Company’s intangible assets had occurred, resulting in an impairment charge of $10.0 million, in impairment losses related to customer relationships and non-compete agreements that was recognized andwhich is included in other expense, net. discontinued operations in the consolidated statement of operations and comprehensive loss. Amortization expense was $7.7 million, $8.1$5.1 million and $8.7$7.7 million for the years ended December 31, 2015 and 2014, 2013respectively, which is included in discontinued operations in the consolidated statement of operations and 2012, respectively. At December 31, 2014, estimated future amortization of separately identifiable intangibles for each of the next five years and thereafter is: 2015 -$6.3 million, 2016 - $4.2 million, 2017 - $3.5 million, 2018 - $3.5 million, 2019 - $3.5 million and thereafter - $6.6 million.comprehensive loss. NOTE 64 — INVENTORY Inventory iswas comprised of the following components below at December 31, 2014 and 2013:is included in current assets of discontinued operations. All inventory was sold in the Sales Transaction, thus inventory balances at December 31, 2015 are zero. | | December 31, | | | December 31, | | | | 2014 | | | 2013 | | | 2014 | | Finished goods | | $ | 12,285 | | | $ | 11,587 | | | $ | 12,285 | | Raw materials | | | 2,781 | | | | 2,042 | | | | 2,781 | | Work in process | | | 360 | | | | 403 | | | | 360 | | Total | | $ | 15,426 | | | $ | 14,032 | | | $ | 15,426 | |
NOTE 75 — PROPERTY AND EQUIPMENT All of the property and equipment and accumulated depreciation at December 31, 2015 is related to continuing operations and all of the property and equipment and accumulated depreciation at December 31, 2014 is related to discontinued operations. Property and equipment, net as of December 31, 20142015 and 20132014 consist of the following: | | December 31, | | | December 31, | | | | 2014 | | | 2013 | | | 2015 | | | 2014 | | Items in service | | $ | 48,928 | | | $ | 47,851 | | | $ | - | | | $ | 48,928 | | Equipment, laundry facility equipment and furniture | | | 10,276 | | | | 9,456 | | | | - | | | | 10,276 | | Vehicles | | | 2,380 | | | | 2,723 | | | | - | | | | 2,380 | | Computer equipment | | | 2,312 | | | | 2,480 | | | | - | | | | 2,312 | | Computer software | | | 7,378 | | | | 7,236 | | | | 27 | | | | 7,378 | | Building and leasehold improvements | | | 6,191 | | | | 6,127 | | | | - | | | | 6,191 | | | | | 77,465 | | | | 75,873 | | | | 27 | | | | 77,465 | | Less accumulated depreciation and amortization | | | (40,428 | ) | | | (32,031 | ) | | | (1 | ) | | | (40,428 | ) | Property and equipment, net | | $ | 37,037 | | | $ | 43,842 | | | $ | 26 | | | $ | 37,037 | |
Depreciation and amortizationDiscontinued operations’ depreciation expense on property and equipment for the years ended December 2015 and 2014 2013, and 2012 was $13.6 million, $14.0$8.4 million and $12.3$13.5 million, respectively.respectively, and is included in discontinued operations in the consolidated statement of operations and comprehensive loss. The cost and accumulated depreciation of fully depreciated assets are removed from the accounts when assets are disposed.
As of December 31, 20142015 and 2013,2014, computer software includes costs of $6.3 millionzero and $6.1$6.3 million, respectively for upgrades to our enterprise reporting management system and the development of our technology platform for field service operations, accounting, billing and collections. The accumulated depreciation was $5.0 million and $4.1 million as of December 31, 2014. The costs and accumulated depreciation are included in noncurrent assets of discontinued operations in the consolidated balance sheet. Software costs capitalized during 2015 and 2014 were $0.1 million and 2013,$0.3 million, respectively. The weighted average amortization period for capitalized software costs iswas 7 years. Depreciation and amortization expense for capitalized computer software costs included in discontinued operations in the consolidated statement of operations and comprehensive loss was $0.3 million for the year ended December 31, 2015 and $0.9 million for each of the yearsyear ended December 31, 2014, 2013,2014. There are no capital leases included in property and 2012. Atequipment as of December 31, 2014, estimated amortization of computer software costs for each of the next five years is: 2015 - $0.4 million, 2016 - $0.3 million, 2017 - $0.3 million, 2018 - $0.2 million, and $0.1 million thereafter. 2015. As of December 31, 2014, property and equipment includesincluded $0.4 million in recorded capital leases with $0.2 million in accumulated depreciation.depreciation and is included in noncurrent assets of discontinued operations in the consolidated balance sheet. The gross amount of property and equipment recorded under capital leases consistsas of December 31, 2014 consisted of $0.2 million in computers and $0.2 million in machinery and equipment. As described above in Note 2, “Discontinued Operations and Assets Held for Sale,” the Sale Transaction was completed on November 2, 2015, with an effective date of DecemberNovember 1, 2015. As a result of the Sale Transaction, the Company performed an impairment analysis of its long-lived assets in accordance with ASC 360-10, Impairment or Disposal of Long-Lived Assets, as of August 31, 2013, property and equipment includes $0.92015. Based on the analysis performed, it was determined that an impairment of the Company’s fixed assets had occurred, resulting in an impairment charge of $12.6 million, recorded in capital leases with $0.4 million in accumulated depreciation. The gross amountwhich is reported as part of property and equipment recorded under capital leases consists of $0.2 million in computers, $0.1 million in machinery and equipment and $0.6 million in dish machines.discontinued operations. NOTE 86 — LONG-TERM DEBT AND OBLIGATIONS The major components of debt as of December 31, 2014 are listed below. The amounts shown for discontinued operations are included in liabilities and 2013 consistlong term liabilities of discontinued operations. Proceeds from the following: | | December 31, | | | | 2014 | | | 2013 | | Notes payable | | $ | 1,193 | | | $ | 1,721 | | Convertible promissory notes, 4.0%: maturing at various dates through 2016 | | | 832 | | | | 2,679 | | Capitalized lease obligations and other financing | | | 1,044 | | | | 2,854 | | Total debt and obligations | | | 3,069 | | | | 7,254 | | Long-term debt and obligations due within one year | | | (1,884 | ) | | | (5,251 | ) | Long-term debt and obligations | | $ | 1,185 | | | $ | 2,003 | |
Sale Transaction were used to pay off the outstanding debt and Ecolab assumed capital leases in conjunction with the Sale Transaction and thus, the long-term debt and obligations balance as of December 31, 2015 is zero. At December 31, 2014, principal debt payments due for each of the next five years and thereafter are: 2015 - $1.9 million, 2016 - $0.5 million, 2017 - $0.3 million, 2018 - $0.3 million, and thereafter – $0.1 million. | | December 31, 2014 | | | | Continuing Operations | | | Discontinued Operations | | Notes payable | | $ | 1,193 | | | $ | - | | Convertible promissory notes, 4.0%: maturing at various dates through 2016 | | | 832 | | | | - | | Capitalized lease obligations and other financing | | | 843 | | | | 201 | | Total debt and obligations | | | 2,868 | | | | 201 | | Long-term debt and obligations due within one year | | | (1,790 | ) | | | (94 | ) | Long-term debt and obligations | | $ | 1,078 | | | $ | 107 | |
Acquisition Related Notes Payable
In connection with certain acquisitions, the Company incurred or assumed notes payable as part of the purchase price. Two of the seller notes payable totaling $1.2 million as of December 31, 2014 arewere secured by letters of credit and the remaining notes payable arewere secured by the Company. At December 31, 2014, and 2013, these obligations bore interest at rates ranging between 3.7% and 4.0%. Capital lease obligations The remaining notes were paid in full with the proceeds from the Sale Transaction and Other Financing
The Company has entered into capitalized lease obligations with third party finance companies to finance the costletters of certain dish machines. At December 31, 2014 and 2013, these obligations bore interest at rates ranging between 4.0% and 18.4%. The Company has also entered intocredit securing the notes payables with third party finance companies to pay various insurance premiums. At December 31, 2014 and 2013, these obligations bore interest at rates ranging between 2.3% and 2.8%.were cancelled.
Convertible promissory notes During 2012 and 2011, the Company issued eighteen convertible promissory notes with an aggregate principal value of $10.9 million as part of total consideration paid for acquisitions that were recorded at fair value on the date of issuance. The Company makesmade quarterly cash payments through each note’s maturity date. The ability to settle these notes with shares existexisted at the Company’s election into a maximum of 2,823,853 shares of common stock. The Company may settlehave settled these notes at any time prior to and including the maturity date any portion of the outstanding principal amount, plus accrued interest in a combination of cash and shares of common stock. To the extent that the Company’s common stock iswas part of such settlement, the settlement price iswas the most recent closing price of the Company’s common stock on the trading day prior to the date of settlement. Although none of these notes have beenwere settled to date with shares, if all notes outstanding at December 31, 2014 were to behad been settled with shares, the Company would issuehave issued approximately 444,886 shares of common stock. These notes do not require remeasurement to fair value after the business combination dates. During 2011, the Company issued two convertible promissory notes with an aggregate principal value of $3.4 million as part of total consideration paid for acquisitionsCapital lease obligations and were recorded at fair value on the date of issuance, maturing in 2012 and 2013. The holder was able to convert all or a portion of the principal and interest into shares of the Company’s common stock at any time, but not later than the maturity date at a fixed conversion rate of $5.00 per share. In addition, the Company had the option to deliver at any time prior to and including the maturity date any portion of the outstanding principal and accrued interest in shares of common stock. The conversion price at which the principal and accrued interest subject to settlement would be converted to common stock is the lesser of (i) the volume weighted average price for the five trading days on NASDAQ immediately prior to the date of conversion, and (ii) the fixed conversion rate; provided, however, that the closing price per share of common stock as reported on NASDAQ on the trading day immediately preceding the date of conversion was not less than $5.00. The notes were convertible by the holder into a maximum 675,040 shares of the Company’s common stock although conversion never occurred. The Company made the last required cash payment on these notes during the fourth quarter of 2012. These notes were carried at fair value and the Company adjusted their carrying value to fair value through operating results as described further in Note 9, “Fair Value Measurements."Other Financing
Equipment Financing
In August 2011, theThe Company entered into an agreement, which provided financing up to $16.4 million for new and used trucks, carts, compactors, and containers for the Waste segment. The financing consisted of one or more fixed rate loans that had a term of five years. The interest rate for borrowings under this facility was determined at the time of each such borrowing and was based on a spread over the five year U.S. swap rate. The commitment letter had an expiration date of February 2012,capitalized lease obligations with a renewal option of six months, if approved. During 2011, the Company made borrowings of $8.9 million at an average interest rate of 3.55%. Separately in August 2011, the Company entered into an agreementthird party finance companies to finance new and replacement vehicles for its fleet that allowed for one or more fixed rate loans totaling, in the aggregate, no more than $18.6 million. The commitment, which expired in June 2012, was secured by Waste segment’s vehicles and containers. The interest rate for borrowings under this facility were determined at the time of the loan and were based on a spread above the U.S. swap rate for the applicable term, either four or five years. Borrowings under this loan commitment were subject to the same financial covenants as the $100.0 million credit facility discussed below and were $6.9 million during 2011. Borrowings under these agreements were subsequently paid off using proceeds from the disposition of the Waste segment as discussed in Note 2, “Discontinued Operations and Assets Held for Sale.”
2011 Revolving Credit Facilities
In March 2011, we entered into a $100.0 million senior secured revolving Credit Facility (the "Credit Facility"), which replaced the Company’s former credit facilities. Under the Credit Facility, the Company had an initial borrowing availability of $32.5 million, which increased to the fully committed $100.0 million upon delivery of our unaudited quarterly financial statements for the quarter ended March 31, 2011 and satisfactioncost of certain financial covenants regarding leveragedish machines. At December 31, 2014, these obligations bore interest at rates ranging between 4.0% and coverage ratios and a minimum liquidity requirement, which requirements we met as of March 31, 2011. Borrowings under the Credit Facility were secured by a first priority lien on substantially all existing and subsequently acquired assets, including $25.0 million of cash on borrowings in excess of $75.0 million. Furthermore, borrowings under the facility were guaranteed by all domestic subsidiaries and secured by substantially all assets and stock of domestic subsidiaries and substantially all stock of foreign subsidiaries. Interest on borrowings under the Credit Facility typically accrued at London Interbank Offered Rate (“LIBOR”) plus 2.5% to 4.0%, depending on the ratio of senior debt to “Adjusted EBITDA” (as such term is defined in the credit facility, which included specified adjustments and allowances authorized by the lender)18.4%. The Company also had the option to request swingline loans and borrowings using a base rate. Interest was payable monthly or quarterly on all outstanding borrowings.
Borrowings and availability under the Credit Facility were subject to compliance with financial covenants, including achieving specified consolidated Adjusted EBITDA levels and maintaining leverage and coverage ratios and a minimum liquidity requirement. The Credit Facility also placed restrictions on our ability to incur additional indebtedness, to make certain acquisitions, to create liens or other encumbrances, to sell or otherwise dispose of assets, and to merge or consolidate with other entities or enter into a change of control transaction. In August 2011, the Company entered into an amendmentnotes payables with third party finance companies to the Credit Facility that modified the covenants, including an increase in permitted new indebtedness to $40.0 million.pay various insurance premiums. At December 31, 2014, these obligations bore interest at rates ranging between 2.3% and 2.8%. The Credit Facility was subject to other standard default provisions. During 2012, we amended our Credit Facility with Wells Fargo Bank, National Association on each of April 12, 2012, May 15, 2012, June 28, 2012, July 30, 2012, August 31, 2012, September 27, 2012,capitalized leases and October 31, 2012, in each case, primarily to extend the datesnotes payable were either cancelled or assumed by which we were required to file our 2011 Form 10-K and Forms 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 and to avoid potential defaults for not timely filing these reports. In addition, the August 31, 2012 amendment reduced the Company’s maximum borrowing limit to $50.0 million, provided that the Company met certain borrowing base requirements. The September 27, 2012 amendment further reduced the Company’s maximum borrowing limit to $25.0 million, provided that the Company met certain modified borrowing base requirements. The October 31, 2012 amendment required the Company to place certain amounts in a collateral account under the sole controlEcolab as part of the administrative agent to meet the Company’s unencumbered liquidity requirements. In connection with the sale of our Waste segment on November 15, 2012, as discussed in Note 2 “Discontinued Operations and Assets Held for Sale” we paid off the Credit Facility which resulted in its termination. Transaction.
2014 Revolving Credit Facility On August 29, 2014, the Company entered into a $20.0 million revolving credit facility, through the execution of a Loan and Security Agreement, by and among the Company, as Guarantor, and certain subsidiaries of the Company, collectively, as Borrower, and Siena Lending Group LLC, as Lender (the “Credit Facility”). The Credit Facility matureswas paid in full and terminated on August 29, 2017.November 2, 2015 in connection with the Sale Transaction. Interest on borrowings under the Credit Facility will accrueaccrued at the Base Rate plus 2.00% and will bewere payable monthly. Base Rate iswas defined as the greater of (1) the Prime Rate, (2) the Federal Funds Rate plus 0.50%, or (3) 3.25%. Borrowings and availability under the Credit Facility arewere subject to a borrowing base and limitations, and compliance with other terms specified in the agreement. Borrowings under the Credit Facility arewere secured by a first priority lien on certain of the Company’s and its subsidiaries’ assets. The calculated borrowing base as of December 31, 2014 was $13.3 million, of which $4.4 million was outstanding under letters of credit and $8.9 million was unused. The Credit Facility containscontained certain customary representations and warranties, and certain customary covenants on the Company’s ability to, among other things, incur additional indebtedness, create liens or other encumbrances, sell or otherwise dispose of assets, pay dividends, and merge or consolidate with other entities or enter into a change of control transaction. The Credit Facility containscontained various events of default. The Company was not in default with covenants under the Credit Facility as of December 31, 2014. As of March 30, 2015, the balance on the Credit Facility is $3.2 million. NOTE 97 — FAIR VALUE MEASUREMENTS The fair value of the above convertible promissory notes issued as part of acquisitions is based primarily on a Black-Scholes pricing model. The significant management assumptions and estimates used in determining the fair value include the expected term and volatility of the Company’s common stock. The expected volatility is based on an analysis of industry peer's historical stock price over the term of the note, which is estimated at approximately 25.0%. The Company believes that using a peer group stock volatility rate is appropriate given the Company’s relatively short history as a public company, which involved a high growth phase and the audit committee investigation, discussed further in Note 16 “Commitments and Contingencies,” which resulted in the delinquent filings of certain of the Company's financial statement filings with the SEC related to 2011 and 2012. The convertible promissory notes are Level 3 financial instruments since they are not traded on an active market and there are unobservable inputs, such as expected volatility used to determine the fair value of these instruments.
In addition, during 2011, the Company issued an earn-out that was to be settled in up to 90,909 shares of common stock held in escrow within one year from the date of acquisition or once the acquired business’s revenue achieves an agreed upon level. In 2012, the Company released from escrow all 90,909 shares of common stock to the sellers. The following table is a reconciliation of changes in fair value of the notes and contingent earn-outs that are required to be marked to market each subsequent reporting period under generally acceptable accounting principles, and have been classified as Level 3 in the fair value hierarchy for the years ended December 31, 2014 and 2013:
| | 2014 | | | 2013 | | | | | | | | | Balance at beginning of period | | $ | - | | | $ | 886 | | Settlement/conversion of convertible promissory notes | | | - | | | | (886 | ) | Balance at end of period | | $ | - | | | $ | - | |
In connection with a distribution agreement entered into in December 2010, the Company provided a guarantee that the distributor's operating cash flows associated with the agreement would not fall below certain agreed-to minimums, subject to certain pre-defined conditions, over the ten year term of the distribution agreement. If the distributor's annual operating cash flow does fallfell below the agreed-to annual minimums, the Company will reimbursewould have reimbursed the distributor for any such short fall up to a pre-designated amount. No value was assigned to the fair value of the guarantee at December 31, 2014 and December 31, 2013 based on a probability assessment of the projected cash flows. This liability would be considered a Level 3 financial instrument given the unobservable inputs used in the projected cash flow model. There have been no transfers between Level 1, 2, and 3 financial instruments during the threetwo years ended December 31, 2014.2015. This distribution agreement was assumed by Ecolab in conjunction with the Sale Transaction. Non-Recurring Fair Value Measurements There were no assets held for sale at December 31, 2015 and 2014. The asset held for sale balance at December 31, 2013 was $4.5 million. Total impairment adjustments to the estimated fair value of the Company’s assets held for sale for the twelve months ended December 31, 2015 and 2014 were zero and 2013 were $3.0 million, and $6.4 million, respectively.respectively, which are included in discontinued operations. Fair value iswas based on the estimated net proceeds from the sale of the assets which arewere derived based on a number of factors; including standard industry multiples of revenues or operating metrics and the status of ongoing sales negotiations and asset purchase agreements where available. Our estimates of fair value arewere regularly reviewed and subject to changes based on market conditions, changes in the customer base of the operations or routes and our continuing evaluation as to the facility's acceptable sale price. These assets arewere measured using Level 3 inputs. NOTE 10 — ADVANCES FROM SHAREHOLDERS
In August 2010, During 2014, in conjunction with its impairment test, the Company borrowed $2.0recorded a goodwill impairment charge of $5.8 million, for working capital purposes, pursuant to an unsecured note payable to oneand is included in discontinued operations in the consolidated statement of its shareholders that bore interest at the short-term Applicable Federal Rate. The note was paid in full following the sale of the Waste segment which isoperations and comprehensive loss as further discussed in Note 2 “Discontinued Operations3, “Goodwill and Assets HeldOther Intangible Assets”. Determining fair value included the use of significant estimates and assumptions. Management utilized an income approach, specifically the discounted cash flow technique as a means for Sale”. Asestimating fair value. This discounted cash flow analysis required various assumptions including those about future cash flows, customer growth rates and discount rates. Expected cash flows were based on historical customer growth, including attrition, future strategic initiatives and continued long-term growth of the datebusiness. The discount rates used for the analysis reflected a weighted average cost of capital based on industry and capital structure adjusted for equity risk and size risk premiums. These estimates could have been affected by factors such as customer growth, pricing, and economic conditions that could have been difficult to predict. These assets were measured using Level 3 inputs.
During the third quarter of 2015, as a result of the Merger,Sale Transaction, the Company had borrowed $21.4 million underperformed an unsecured note payable to oneimpairment analysis of its shareholders. The note bore interest at the one month LIBOR plus 2.0%. Interest accruedintangible assets in accordance with ASC 350, Intangible-Goodwill and Other and its long-lived assets in accordance with ASC 360-10, Impairment or Disposal of Long-Lived Assets as of August 31, 2015. Based on the noteanalysis performed, it was included in accrued expenses and was $0.8 million asdetermined that an impairment of the dateCompany’s intangible assets had occurred, resulting in an impairment charge of $10.0 million, which is reported as part of discontinued operations in the consolidated statement of operations and comprehensive loss as discussed in Note 3, "Goodwill and Other Intangible Assets" and an impairment of the Merger.Company’s fixed assets had occurred, resulting in an impairment charge of $12.6 million, which is reported as part of discontinued operations in the consolidated statement of operations and comprehensive loss as discussed in Note 5, "Property and Equipment." These advances plus accrued interestassets were converted into equity upon completion of the Merger.measured using Level 3 inputs. NOTE 118 —OTHER RELATED PARTY TRANSACTIONS The Company paid fees for training course development and utilization of the delivery platform from a company, the majority of which iswas owned by a partnership in which a former director and two former executives of the Company havehad a controlling interest. Fees paid during fiscal years 2014, 20132015 and 20122014 were $0.1 million in each of the three years.two years and are included in discontinued operations in the consolidated statement of operations and comprehensive loss. The Company purchased chemical products from an entity owned, in full or in part, by a Company employee. Purchases were $5.4 million, $7.2 millionzero and $7.4$5.4 million for the fiscal years ended 2015 and 2014, 2013,respectively, and 2012, respectively.are included in discontinued operations. At December 31, 20142015 and 2013,2014, the Company hashad zero and $0.3 million and $0.6 million included in accounts payable of discontinued operations to these entities, respectively. During the year ended December 31, 2014,2015, the Company was obligated to make lease payments pursuant to certain real property and equipment lease agreements with employees that were former owners of acquired companies. During 2014, 2013,2015 and 2012,2014, the Company paid $0.9 million, $1.2$0.6 million and $1.3$0.9 million, respectively, related to these leases.leases and the amounts are included in discontinued operations in the consolidated statement of operations and comprehensive loss. In connection with the acquisition of Choice, we entered into capital leases that had initial terms of five or ten years with companies owned by former shareholders of Choice, to finance the cost of leasing office buildings and properties, including warehouses. The Company sold its Waste segment, which consisted principally of Choice, during the fourth quarter of 2012, as more fully described in Note 2, “Discontinued Operations and Assets Held for Sale,” and in connection therewith transferred all remaining capital lease obligations to the buyers.
NOTE 129 — INCOME TAXES Net loss from continuing operations before income taxes for the years ended December 31, 2014, 20132015 and 20122014 includes: | | 2014 | | | 2013 | | | 2012 | | Domestic | | $ | (42,457 | ) | | $ | (152,061 | ) | | $ | (61,400 | ) | Foreign | | | (4,440 | ) | | | (1,065 | ) | | | (622 | ) | | | | | | | | | | | | | | Net loss from continuing operations before income taxes | | $ | (46,897 | ) | | $ | (153,126 | ) | | $ | (62,022 | ) |
F-21
The components of
| | 2015 | | | 2014 | | Domestic | | $ | (11,326 | ) | | $ | (6,498 | ) | Net loss from continuing operations before income taxes | | $ | (11,326 | ) | | $ | (6,498 | ) |
Net loss from discontinued operations before income taxes for the years ended December 31, 2015 and 2014 includes: | | 2015 | | | 2014 | | Domestic | | $ | (45,441 | ) | | $ | (35,959 | ) | Foreign | | | (866 | ) | | | (4,440 | ) | Net loss from discontinued operations before income taxes | | $ | (46,307 | ) | | $ | (40,399 | ) |
There is no income tax (benefit)benefit or expense on continuing operations for the years ended December 31, 2014, 20132015 and 2012 includes:2014.
The components of the income tax benefit on discontinued operations for the years ended December 31, 2015 and 2014 include: | | 2014 | | | 2013 | | | 2012 | | | 2015 | | | 2014 | | Current Federal, state and foreign | | $ | 2 | | | $ | (41 | ) | | $ | 383 | | | $ | (19 | ) | | $ | 2 | | Deferred: | | | | | | | | | | | | | | | | | | | | | Federal and state | | | 13 | | | | (2,596 | ) | | | 18,565 | | | | (24 | ) | | | 13 | | Foreign | | | (104 | ) | | | 43 | | | | (195 | ) | | | - | | | | (104 | ) | Total income tax (benefit) expense | | $ | (89 | ) | | $ | (2,594 | ) | | $ | 18,753 | | | Total benefit from income taxes | | | $ | (43 | ) | | $ | (89 | ) |
A reconciliation of the statutory U.S. Federal income tax rate to the Company’s effective income tax rate applicable tofor continuing operations for the years ended December 31, 2014, 2013,2015 and 20122014 is as follows: | | 2014 | | | 2013 | | | 2012 | | | 2015 | | | 2014 | | | | | | | | | | | | | | | | | | U.S. Federal statutory rate | | | 35 | % | | | 35 | % | | | 35 | % | | | 34 | % | | | 35 | % | State and local taxes, net of Federal benefit | | | 3 | | | | 3 | | | | 3 | | | | 3 | | | | 4 | | Goodwill impairment | | | (1 | ) | | | (3 | ) | | | - | | | Other permanent expenses | | | (1 | ) | | | - | | | | - | | | | (6 | ) | | | - | | Change in valuation allowance | | | (36 | ) | | | (33 | ) | | | (68 | ) | | | (31 | ) | | | (39 | ) | Effective income tax rate | | | - | % | | | 2 | % | | | (30 | ) % | | | - | % | | | - | % |
Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets and liabilities from continuing operations are as follows: | | 2014 | | | 2013 | | Deferred tax assets | | | | | | | Basis difference in goodwill | | $ | 26,449 | | | $ | 29,040 | | Net operating loss carryforward | | | 55,862 | | | | 39,772 | | Basis difference in other intangible assets | | | 3,462 | | | | 2,838 | | Stock based compensation | | | 3,498 | | | | 3,382 | | Allowance for uncollectible receivables | | | 1,184 | | | | 908 | | State basis difference in property and equipment | | | 890 | | | | 916 | | Inventory | | | 550 | | | | 1,559 | | Accrued liabilities | | | 1,827 | | | | 2,205 | | Other | | | 127 | | | | 127 | | Total deferred income tax assets | | | 93,849 | | | | 80,747 | | Valuation allowance | | | (86,784 | ) | | | (71,363 | ) | Net deferred tax assets | | | 7,065 | | | | 9,384 | | | | | | | | | | | Deferred tax liabilities | | | | | | | | | Basis difference in property and equipment | | | 7,089 | | | | 9,502 | | Total deferred tax liabilities | | | 7,089 | | | | 9,502 | | | | | | | | | | | Total net deferred income tax liabilities | | $ | 24 | | | $ | 118 | |
The net deferred income tax liability of $0.1 million as of December 31, 2014 consists of the current asset of $0.5 million and non-current liability of $0.6 million. The net deferred income tax liability of $0.1 million as of December 31, 2013 consists of the current asset of $0.9 million and non-current liability of $1.0 million.F-22
For the year ended December 31, 2013, there was a deferred tax liability associated with excess book over tax goodwill as it relates to the Company’s Canadian subsidiary. As goodwill is considered to be an indefinite lived intangible, this associated deferred tax liability is not allowed to be netted with other deferred tax assets in determining the need for a valuation allowance. This resulted in an overall net deferred tax liability after applying the valuation allowance. | | 2015 | | | 2014 | | Deferred tax assets | | | | | | | Capital loss carryforward | | $ | 50,373 | | | $ | - | | Net operating loss carryforward | | | 14,319 | | | | 11,007 | | Accrued liabilities | | | 197 | | | | - | | Other | | | 22 | | | | - | | Total deferred income tax assets | | | 64,911 | | | | 11,007 | | Valuation allowance | | | (64,911 | ) | | | (11,007 | ) | Net deferred tax assets | | | - | | | | - | | | | | | | | | | | Deferred tax liabilities | | | | | | | | | Total deferred tax liabilities | | | - | | | | - | | | | | | | | | | | Total net deferred income tax liabilities | | $ | - | | | $ | - | |
Due to the impairment of goodwill for book purposes as of June 30, 2014, a deferred tax asset exists related to goodwill for the Canadian subsidiary. Given the change from 2013 to 2014, from a deferred tax liability to a deferred tax asset, a tax benefit for 2014 of approximately $0.1 million was recognized.
On September 13, 2013 the U.S. Department of the Treasury issued final regulations that provide guidance on capitalization of tangible property. These regulations will result in our adoption of certain accounting method changes with respect to property and equipment, inventory and supplies. We are currently analyzing these accounting method changes, which will be adopted during the 2015 tax year, but we do not believe they will have a material impact on the consolidated financial statements.
The Company has incurred significant net losses for financial reporting purposes. Recognition of deferred tax assets will require generation of future taxable income. A valuation allowance is required to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. During the twelve month period ended December 31, 2014,2015, the Company concluded that the likelihood of realization of the benefits associated with its U.S. deferred tax assets does not reach the level of more likely than not. As a result, the Company continues to recognize a full valuation allowance on all U.S. deferred tax assets as of at December 31, 2014.2015. As of each reporting date, the Company will consider new evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. The Company does not consider the deferred tax liabilities related to indefinite lived intangible assets when determining the need for a valuation allowance. AtThe December 31, 2014 and 2013,2015, net operating loss (“NOL”) carryforwardscarryforward for federal income tax purposes were $145.9is $38.1 million for continuing operations. The federal and $104.4 million. The Federal NOL’sstate NOLs will begin to expire in 20302029.
The Sale Transaction resulted in capital losses for tax purposes. However, due to various tax limitations, including tax matters included in the terms of the Sale Transaction and some of which are controlled by Ecolab, we are unable to determine the various state NOL’s will begin toamount of capital loss that can be recognized until filing the tax returns. In addition, any capital loss recognized can only be deducted against capital gains and would become a capital loss carryforward which would expire between the years 2025 and 2030.in 2020. We have no recorded uncertain tax positions, therefore there would be no impact to the effective tax rate. The Company includes interest and penalties accrued in the consolidated financial statements as a component of interest expense. No significant amounts were required to be recorded as of December 31, 20142015 and 20132014 or during the threetwo year period ended December 31, 2014.2015. The tax years ended December 31, 20112012 through December 31, 20142015 are considered to be open under statute and therefore may be subject to examination by the Internal Revenue Service and various state jurisdictions. We do not expect the unrecognized tax benefits to change significantly over the next 12 months. There are no deferred tax assets or liabilities of discontinued operations at December 31, 2015 due to the Sale Transaction. The major components of deferred tax assets and liabilities from discontinued operations as of December 31, 2014 are as follows: | | 2014 | | Deferred tax assets | | | | Basis difference in goodwill | | $ | 26,449 | | Net operating loss carryforward | | | 44,855 | | Basis difference in other intangible assets | | | 3,462 | | Stock based compensation | | | 3,498 | | Allowance for uncollectible receivables | | | 1,184 | | State basis difference in property and equipment | | | 890 | | Inventory | | | 550 | | Accrued liabilities | | | 1,827 | | Other | | | 127 | | Total deferred income tax assets | | | 82,842 | | Valuation allowance | | | (75,777 | ) | Net deferred tax assets | | | 7,065 | | | | | | | Deferred tax liabilities | | | | | Basis difference in property and equipment | | | 7,089 | | Total deferred tax liabilities | | | 7,089 | | | | | | | Total net deferred income tax liabilities | | $ | 24 | |
The total net deferred income tax liability of $0.1 million as of December 31, 2014 is classified between other current assets of $0.5 million and noncurrent liability of $0.6 million. Due to the Sale Transaction, these deferred tax assets and liabilities are now reflected in discontinued operations. Due to the impairment of goodwill for book purposes as of June 30, 2014, a deferred tax asset existed related to goodwill for the Canadian subsidiary. Given the change from 2013 to 2014, from a deferred tax liability to a deferred tax asset, a tax benefit for 2014 of approximately $0.1 million was recognized and is included in discontinued operations. For the year ended December 31, 2014, there was a deferred tax liability associated with excess book over tax tradenames as it relates to a U.S. subsidiary of the Company. Since tradenames are considered to be an indefinite lived intangible, the associated deferred tax liability is not allowed to be netted with other deferred tax assets in determining the need for a valuation allowance. This resulted in an overall net deferred tax liability after applying the valuation allowance. Due to the impairment of tradenames for book purposes in the third quarter of 2015, a deferred tax asset now exists related to tradenames for a U.S. subsidiary. Given the change from 2014 to 2015 from a deferred tax liability to a deferred tax asset, a tax benefit for 2015 was recognized and is included in discontinued operations. After the Sale Transaction, the net operating loss (“NOL”) carryforwards for federal income tax purposes were $139.6 million. The federal and state NOL relating to the discontinued operations were acquired by Ecolab. NOTE 1310 — EQUITY MATTERS A summary of the changes in each component of accumulated other comprehensive loss for the year ended December 31, 20142015 is provided below: | | Foreign Exchange | | | Defined Benefit Plan | | | Total | | Balance at December 31, 2013 | | $ | (94 | ) | | $ | (435 | ) | | $ | (529 | ) | Current period other comprehensive loss | | | (31 | ) | | | (747 | ) | | | (778 | ) | Balance at December 31, 2014 | | $ | (125 | ) | | $ | (1,182 | ) | | $ | (1,307 | ) |
| | Foreign Exchange | | | Defined Benefit Plan | | | Total | | Balance at December 31, 2014 | | $ | (125 | ) | | $ | (1,182 | ) | | $ | (1,307 | ) | Current period other comprehensive income | | | 125 | | | | (82 | ) | | | 43 | | Balance at December 31, 2015 | | $ | - | | | $ | (1,264 | ) | | $ | (1,264 | ) |
Stock Based Compensation In November 2010, our board of directors approved, subject to shareholder approval, the Swisher Hygiene Inc. 2010 Stock Incentive Plan (the “SIP Plan”) to attract, retain, motivate and reward key officers and employees. The SIP Plan, which was approved by shareholders in May 2011 allowsallowed for the grant of stock options, restricted stock units and other equity instruments up to a total of 1,140,000 shares of the Company’s common stock. On November 1, 2015 in connection with the Sale Transaction, the change of control under the SIP Plan was triggered and all outstanding stock options became vested. Participants were allowed a period of time to exercise the options, then all unexercised outstanding stock options were cancelled February 2, 2016. On November 5, 2015, as a consequence of the Sale Transaction, the Board of Directors approved the cancellation of outstanding vested and deferred restricted stock units and the payment of $1.05 for each share underlying the restricted stock units in lieu of issuing shares of stock as provided for in the terms of the Restricted Stock Unit plan documents. The payment for the restricted stock units was paid to recipients on January 15, 2016. Effective February 19, 2016, the SIP Plan was terminated by the Board of Directors. All options arewere exercisable at a price equal to the closing market value of the Company’s common stock on the date immediately preceding the grant. Options generally vestvested in four equal annual installments beginning on the first anniversary of the grant date and generally expireexpired ten years from the date of grant. Restricted stock units arewere issued at the closing market value of the Company’s common stock on the date immediately preceding the grant and generally vestvested over four years with the first vesting occurring twelve months after the award and the remaining vesting occurringoccurred on the subsequent anniversary dates of the award. Recipients of both options and restricted stock units maywere not allowed to sell or transfer their shares until the recipient receivesreceived the shares underlying the award. Stock Option Activity A summary of the Company’s stock option activity and related information for 20142015 and 20132014 is as follows: | | Outstanding Options | | | | Number of Options | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Term (in years) | | | Aggregate Intrinsic Value (in millions) | | | | | | | | | | | | | | | Balance at December 31, 2012 | | | 305,366 | | | $ | 43.84 | | | | | | | | Options granted | | | 321,632 | | | $ | 7.89 | | | | | | | | Options cancelled | | | (101,118 | ) | | $ | 46.14 | | | | | | | | Options exercised | | | - | | | | | | | | | | | | Balance at December 31, 2013 | | | 525,880 | | | $ | 22.05 | | | | | | | | Options granted | | | 378,000 | | | $ | 4.10 | | | | | | | | Options cancelled | | | (194,634 | ) | | $ | 18.00 | | | | | | | | Options exercised | | | - | | | | | | | | | | | | Balance at December 31, 2014 | | | 709,246 | | | $ | 13.59 | | | | 8.66 | | | $ | - | | | | | | | | | | | | | | | | | | | Expected to Vest after December 31, 2014 | | | 138,094 | | | $ | 12.21 | | | | 8.47 | | | $ | - | | Exercisable at December 31, 2014 | | | 153,924 | | | $ | 33.85 | | | | 7.05 | | | $ | - | |
| | Outstanding Options | | | | Number of Options | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Term (in years) | | | Aggregate Intrinsic Value (in millions) | | | | | | | | | | | | | | | Balance at December 31, 2013 | | | 525,880 | | | $ | 22.05 | | | | | | | | Options granted | | | 378,000 | | | $ | 4.10 | | | | | | | | Options cancelled | | | (194,634 | ) | | $ | 18.00 | | | | | | | | Options exercised | | | - | | | | | | | | | | | | Balance at December 31, 2014 | | | 709,246 | | | | | | | | | | | | Options granted | | | - | | | | | | | | | | | | Options cancelled | | | (222,033 | ) | | $ | 13.93 | | | | | | | | Options exercised | | | - | | | | | | | | | | | | Balance at December 31, 2015 | | | 487,213 | | | $ | 13.45 | | | | 0.1 | | | $ | - | | | | | | | | | | | | | | | | | | | Expected to Vest after December 31, 2015 | | | - | | | | | | | | | | | $ | - | | Exercisable at December 31, 2015 | | | 487,213 | | | $ | 13.45 | | | | 0.1 | | | $ | - | |
The aggregate intrinsic value representsrepresented the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted average exercise price multiplied by the number of options outstanding or exercisable. Total intrinsic value of options at time of exercise was $0.0 million $0.0 millionfor 2015 and $0.2 million for 2014, 2013 and 2012, respectively. The weighted average grant-date fair value of options granted was $1.47 $2.80 and $7.20 for 2014, 2013 and 2012, respectively. 2014. There were no options granted in 2015. In connection with the Merger, options previously issued by CoolBrands that were outstanding at the date of the Merger were fully vested and all related compensation expense was recognized by CoolBrands prior to November 2, 2010, the Merger date. At December 31, 2012, 17,500 options remain outstanding and exercisable at a weighted average price of $7.89, weighted average remaining contractual life of 1.6 years and an aggregate intrinsic value of $0.2 million. At December 31, 2013, 17,500 options remain outstanding and exercisable at a weighted average price of $7.89, weighted average remaining contractual life of 0.6 years and an aggregate intrinsic value of $0.0 million. At December 31, 2014, 6,000 options remainremained outstanding and exercisable at a weighted average price of $11.50, weighted average remaining contractual life of 0.2 years and an aggregate intrinsic value of $0.0 million. At December 31, 2015, none of the options remained outstanding and exercisable. The exercise prices for options granted during 2014 and 2013 ranged from $4.04 to $4.80 per share and $5.90 to $9.30 per share, respectively. share. There were no options granted in 2015. As noted above, all unexercised options at February 2, 2016 were cancelled. Restricted Stock Units A summary of the Company’s restricted stock activity for 20142015 and 20132014 is as follows: | | Number of Restricted Stock Units | | | Weighted - Average Grant Date Fair Value | | | Aggregate Intrinsic Value (in millions) | | | Number of Restricted Stock Units | | | Weighted - Average Grant Date Fair Value | | | Aggregate Intrinsic Value (in millions) | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2012 | | | 89,660 | | | $ | 51.47 | | | $ | 1.6 | | | Granted | | | 32,229 | | | $ | 12.32 | | | | | | | Vested | | | (66,921 | ) | | $ | 31.57 | | | | | | | Forfeited | | | (16,782 | ) | | $ | 40.53 | | | | | | | Balance at December 31, 2013 | | | 38,186 | | | $ | 56.06 | | | $ | 0.2 | | | | 38,186 | | | $ | 56.06 | | | $ | 0.2 | | Granted | | | 53,873 | | | $ | 3.71 | | | | | | | | 53,873 | | | $ | 3.71 | | | | | | Vested | | | (73,786 | ) | | $ | 17.67 | | | | | | | | (73,786 | ) | | $ | 17.67 | | | | | | Forfeited | | | (11,507 | ) | | $ | 42.26 | | | | | | | | (11,507 | ) | | $ | 42.26 | | | | | | Balance at December 31, 2014 | | | 6,766 | | | $ | 81.38 | | | $ | - | | | | 6,766 | | | | | | | | | | Granted | | | | - | | | | | | | | | | Vested | | | | (6,748 | ) | | $ | 77.39 | | | | | | Forfeited | | | | (18 | ) | | $ | 28.83 | | | | | | Balance at December 31, 2015 | | | | - | | | $ | - | | | $ | - | |
There were no restricted stock units granted in 2015 as the Directors received a cash payment in lieu of a restricted stock unit grant. As noted above, the outstanding restricted stock units at November 5, 2015 were cancelled by the Board of Directors and recipients were paid $1.05 per share in lieu of receiving shares of stock. Stock Based Compensation The Company measured and recognized all stock based compensation at fair value at the date of grant and recognized compensation expense over the requisite service period for awards expected to vest. Stock based compensation cost in 2014 for stock options asgranted were calculated by the Company using Black-Scholes option-pricing model with the following assumptions: | | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | | Expected dividend yield | | | - | | | | - | | | | - | | Risk free interest rate | | | 1.9% - 2.0 | % | | | 1.5% - 1.9 | % | | | 0.9% - 1.2 | % | Expected volatility | | | 32.70 | % | | | 30.70 | % | | | 30.70 | % | Expected life (years) | | | 6.25 | | | | 6.25 | | | | 6.25 | |
| | 2014 | | | | | | Expected dividend yield | | | - | | Risk free interest rate | | | 1.9% - 2.0 | % | Expected volatility | | | 32.70 | % | Expected life (years) | | | 6.25 | |
The expected dividend yield was assumed to be zero as we havehad not paid, and dodid not anticipate paying, cash dividends on our shares of common stock. The risk-free interest rate iswas determined based on a yield curve of U.S. treasury rates based on the expected life of the options granted. The expected volatility was based on an analysis of industry peers historical stock price and the terms of the equity awards. The Company believesbelieved that using a peer group stock volatility rate iswas appropriate given the Company’s relatively short history as a public company, which involved a high growth phase and the audit committee investigation discussed further in Note 1513 “Commitments and Contingencies,” both of which occurred in 2012. The expected life is based on the simplified method as we dodid not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected life of our stock options. The Company estimatesestimated forfeitures based on estimated turnover by relevant employee categories. The Company recognizesrecognized stock based compensation on a straight line basis over the requisite service period. For the years ended December 31, 2014, 20132015 and 2012,2014, the Company recognized stock based compensation expense of $0.7 million and $1.7 million, $2.9 million and $3.5 million, respectively, in discontinued operations in the consolidated statements of operations for both stock options and restricted stock units. Due to the change in control as a result of the Sale Transaction, stock compensation through 2018 of $0.4 million was accelerated and recognized in 2015 and is included in the $0.7 million stock compensation expense. At December 31, 2014, the total2015 there were no unrecognized compensation costs related to outstanding stock options and restricted stock units is $1.0 million. Subsequent to the Company’s notification from NASDAQ in June of 2013, that indicated the Company had completed all outstanding filing requirements and had regained compliance with NASDAQ listing rules, the Company was in a position to settle previously vested RSUs. During 2013, the Company issued the underlying 832,819 shares of common stock and withheld 274,061 shares to cover the required statutory withholding tax totaling $0.2 million, which was determined based on the closing price of our common stock on the date of issuance. These shares are considered retired under the provisions of the Swisher Hygiene Inc. 2010 Stock Incentive Plan. See Note 16, "Commitments and Contingencies" - in the Other Related Matters section.units.
NOTE 1411 — RETIREMENT PLAN An acquired subsidiary of CoolBrands maintained a defined benefit pension plan (the "Plan") covering substantially all salaried and certain executive employees. Subsequent to the acquisition of this subsidiary in 2000 by CoolBrands, all future participation and all benefits under the Plan were frozen. The Plan provides retirement benefits based primarily on employee compensation and years of service up to the date of acquisition. As part of the Merger, on November 2, 2010, Swisher Hygiene Inc. recorded the net underfunded pension obligation of $0.6 million. In December 2015, the Company sent a notice of plan termination to participants and expects to terminate the Plan in 2016. In connection with the termination, the Company will fund the Plan so there will be no minimum regulatory funding requirement in 2016. Since the Company will fund the total benefit obligation, there will be no expected benefit payments under the Plan in future years. The following table reconciles the changes in benefit obligations and Plan assets as of December 31, 20142015 and 20132014 and reconciles the funded status to accrued benefit cost at December 31, 20142015 and 2013:2014: | | Benefit Obligation (In thousands) | | | | | | At December 31, 2012 | | $ | 3,421 | | Interest cost | | | 125 | | Actuarial gain | | | (353 | ) | Benefit payments | | | (117 | ) | At December 31, 2013 | | | 3,076 | | Interest cost | | | 139 | | Actuarial loss | | | 697 | | Benefit payments | | | (117 | ) | At December 31, 2014 | | $ | 3,795 | |
| | Plan Assets (In thousands) | | | | | | | At December 31, 2012 | | $ | 2,045 | | Actual return on plan assets | | | 272 | | Employer contributions | | | 21 | | Benefit payments | | | (117 | ) | At December 31, 2013 | | | 2,221 | | Actual return on plan assets | | | 108 | | Employer contributions | | | 98 | | Benefit payments | | | (117 | ) | At December 31, 2014 | | $ | 2,310 | |
| | Benefit Obligation (In thousands) | | | | | | At December 31, 2013 | | $ | 3,076 | | Interest cost | | | 139 | | Actuarial loss | | | 697 | | Benefit payments | | | (117 | ) | At December 31, 2014 | | | 3,795 | | Interest cost | | | 139 | | Actuarial gain | | | (185 | ) | Benefit payments | | | (129 | ) | At December 31, 2015 | | $ | 3,620 | | | | | | | | | Plan Assets (In thousands) | | | | | | | At December 31, 2013 | | $ | 2,221 | | Actual return on plan assets | | | 108 | | Employer contributions | | | 98 | | Benefit payments | | | (117 | ) | At December 31, 2014 | | | 2,310 | | Actual return on plan assets | | | (66 | ) | Employer contributions | | | 93 | | Benefit payments | | | (129 | ) | At December 31, 2015 | | $ | 2,208 | |
As of December 31, 20142015 and 2013,2014, the net underfunded status of the defined benefit plan is $1.5$1.4 million and $0.8$1.5 million, respectively, which is recognized as accrued benefit cost in other long-term liabilities on the Consolidated Financial Statements. Unrecognized (gains) losses recorded in accumulated other comprehensive loss in the consolidated financial statements were ($1.2) million, ($0.5)1.3) million and $0.1($1.2) million for the periods ended December 31, 2015 and 2014, 2013 and 2012, respectively. The following table provides the components of the net periodic benefit cost (income) for each of the respective fiscal years: | | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | | | | 2015 | | | 2014 | | Interest cost | | $ | 139 | | | $ | 125 | | | $ | 131 | | | $ | 140 | | | $ | 139 | | Expected return on Plan assets | | | (166 | ) | | | (149 | ) | | | (138 | ) | | | (172 | ) | | | (166 | ) | Recognized net actuarial loss | | | 8 | | | | 27 | | | | 21 | | | | 33 | | | | 8 | | Net periodic benefit cost (income) | | $ | (19 | ) | | $ | 3 | | | $ | 14 | | | $ | 1 | | | $ | (19 | ) |
The key assumptions used in the measurement of the benefit obligation are the discount rate and the expected return on Plan assets for each of the respective years are: | | 2014 | | 2013 | | 2012 | | | 2015 | | 2014 | | | | | | | | | | | | | | | Discount rate | | 3.8 | % | | 4.6 | % | | 3.7 | % | | 3.8 | % | | 3.8 | % | Expected return on Plan assets | | 7.5 | % | | 7.5 | % | | 7.5 | % | | 7.5 | % | | 7.5 | % |
The rate used to discount pension benefit plan liabilities was based on the Citigroup Pension Discount Curve at December 31, 20142015 and 2013.2014. The estimated future cash flows for the pension obligation were matched to the corresponding rates on the yield curve to derive a weighted average discount rate. The expected return on Plan assets was developed by determining projected stock and bond returns and then applying these returns to the target asset allocations of the employee benefit trusts, resulting in a weighted average return on Plan assets. The actual historical returns of the Plan assets were also considered. The Company sent a notice of plan termination to participants in December 2015 and expects to terminate the latest actuarial report as of December 31, 2014,Plan in 2016. In connection with the termination, the Company expects thatwill fund the Plan so there will be no minimum regulatory funding requirementsrequirement in 2016. Since the Company will fund the total Projected Benefit Obligation of $0.1$3.6 million, thatthere will need to be made during fiscal 2015. Expectedno expected benefit payments under the Plan overin future years are: 2015 - $0.1 million, 2016 - $0.2 million, 2017 - $0.2 million, 2018 - $0.2 million, 2019 - $0.2 million and 2020 to 2024 – $1.0 million.years.
The Company’s investment strategy is to obtain the highest possible return commensurate with the level of assumed risk. Investments are well diversified within each of the major asset categories. The Company’s allocation of Plan assets and target allocations are as follows: | | Fair Value Measurements | | | Fair Value Measurements | | | | Level 1 as of December 31, | | | Level 1 as of December 31, | | | | 2014 | | | 2013 | | | 2015 | | | 2014 | | Equities: | | | | | | | | | | | | | U. S. | | $ | 1,116 | | | $ | 1,205 | | | $ | 919 | | | $ | 1,116 | | International | | | 337 | | | | 340 | | | | 199 | | | | 337 | | Fixed Income: | | | | | | | | | | | | | | | | | U. S. | | | 560 | | | | 554 | | | | 692 | | | | 560 | | International | | | 82 | | | | 81 | | | | 93 | | | | 82 | | Cash, cash equivalents and other | | | 215 | | | | 51 | | | | 305 | | | | 215 | | Total | | $ | 2,310 | | | $ | 2,231 | | | $ | 2,208 | | | $ | 2,310 | |
The U.S. and International equities are actively traded on a public exchange and are considered Level 1 assets. The fixed income securities are corporate and government bonds that are valued based on prices in active markets for identical transactions and are considered Level 1 assets. There were no Plan assets categorized as Level 2 or Level 3 as of December 31, 20142015 or 2013.2014. There were no significant transfers between Level 1, 2, or Level 3 during the fiscal years 20142015 or 2013.2014. See Note 1, “Operations and Summary of Significant Accounting Policies,” for a description of the fair value hierarchy. NOTE 1512 — LOSS PER SHARE Basic net loss from continuing operations and discontinuing operations attributable to common stockholders per share is computed by dividing the applicable net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Shares of common stock underlying outstanding stock options of which the market price of the common stock is lower than the exercise price of the related options were not considered for any dilutive earnings per share calculation. Shares of common stock underlying unvested restricted stock awards of 6,766, 38,234zero and 395,1806,766 were not included in the computation of diluted loss per share for 2015 and 2014, 2013 and 2012, respectively, assince their inclusion would be anti-dilutive. NOTE 1613 — COMMITMENTS AND CONTINGENCIES We may be involved in litigation from time to time in the ordinary course of business. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, financial condition or results of operations. However, theThe results of these matters cannot be predicted with certainty and we cannot assure you that the ultimate resolution of any legal or administrative proceedings or disputes will not have a material adverse effect on our business, financial conditioncondition. The Company routinely indemnifies its directors and resultsofficers and insures the indemnification risk with various insurance liability policies, primarily directors’ and officers’ coverages. Historically, other than the premiums and the retention associated with the director’s and officers’ coverages, the cost to the company of operations.the indemnifications has been immaterial and based on management’s current knowledge and the Company’s current insurance program, other than the deductible not met at year end of approximately $0.8 million, it is expected that the future cost will also be immaterial; however, we cannot assure that to be the case given the uncertainties inherent in legal proceeding and litigation. Securities Litigation Between March 30,On May 21, 2012, a stockholder derivative action was brought against the Company's former CEO and May 24, 2012, sixformer CFO and the Company's then directors for alleged breaches of fiduciary duty by a purported Company stockholder lawsuits were filed in federal courts in North Carolina andthe United States District Court for the Southern District of New York asserting claims relatingYork. In this derivative action, captioned Arsenault v. Berrard, et al., 1:12-cv-4028, the plaintiff seeks to recover for the Company damages arising out of the Company's March 28, 2012 announcement regarding the Company's Board’sBoard of Director's conclusion that the Company's previously issued interim financial statements for the quarterly periods ended March 31, 2011, June 30, 2011 and September 30, 2011, and the other financial information in the Company's quarterly reports on Form 10-Q for the periods then ended, should no longer be relied upon and that an internal review by the Company's Audit Committee primarily relating to possible adjustments to the Company's financial statements was ongoing. On March 30,August 13, 2012, the Arsenault derivative action, along with a purported Company stockholder commenced arelated putative securities class action on behalf of purchasers of the Company's common stockpending in the U.S. District Court for the Southern District of New York, againstwas transferred to the Company, the former President and Chief Executive Officer ("former CEO"), and the former Vice President and Chief Financial Officer ("former CFO"). The plaintiff asserted claims alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") based on alleged false and misleading disclosures in the Company's public filings. In April and May 2012, four more putative securities class actions were filed by purported Company stockholders in the U.S.United States District Court for the Western District of North Carolina against the same set of defendants. The plaintiffs in these cases asserted claims alleging violations of Sections 10(b) and 20(a) of the Exchange Act based on alleged false and misleading disclosures in the Company's public filings. In each of thewhere other related putative securities class actions were pending. All actions were consolidated under the plaintiffs sought damages for losses suffered by the putative class of investors who purchased the Company’s common stock. On May 21, 2012, a stockholder derivative action was brought against the Company's former CEO and former CFO and the Company's then directors for alleged breaches of fiduciary duty by another purported Company stockholder in the Southern District of New York. In this derivative action, captioned Arsenault v. Berrard, et al., 1:12-cv-4028, the plaintiff seeks to recover for the Company damages arising out of the then possible restatement of the Company's financial statements.
On May 30, 2012, the Company, its former CEO and former CFO filed a motion with the United States Judicial Panel on Multidistrict Litigation ("MDL Panel") to centralize all of the cases in the Western District of North Carolina by requesting that the actions filed in the Southern District of New York be transferred to the Western District of North Carolina. In light of the motion to centralize the cases in the Western District of North Carolina, the Company, its former CEO and former CFO requested from both courts a stay of all proceedings pending the MDL Panel's ruling. On June 4, 2012, the Southern District of New York adjourned all pending dates in the cases in light of the motion to transfer filed before the MDL Panel. On June 13, 2012, the Western District of North Carolina issued a stay of proceedings pending a ruling by the MDL Panel.
On August 13, 2012, the MDL Panel granted the motion to centralize, transferring the actions filed in the Southern District of New York to the Western District of North Carolina as part of MDL No. 2384, captionedcaption In re Swisher Hygiene, Inc. Securities and Derivative Litigation.Litigation In response, on, MDL No. 2384. On August 21, 2012, the Western District of North Carolina issued an order governing the practice and procedure in the actions transferred to the Western District of North Carolina as well as the actions originally filed there. On October 18, 2012, the Western District of North Carolina held an Initial Pretrial Conference at which it appointed lead counsel and lead plaintiffs for the securities class actions, and set a schedule for the filing of a consolidated class action complaint and defendants' time to answer or otherwise respond to the consolidated class action complaint. The Western District of North Carolina stayed the Arsenault derivative action, pending the outcome of the securities class actions.
actions, which as previously disclosed were subsequently settled in August 2014. On April 24, 2013, lead plaintiffs filed their first amended consolidated class action complaint (the "Class Action Complaint") asserting similar claims as those previously alleged as well as additional allegations stemming fromFebruary 9, 2016, the Company's restated financial statements. The Class Action Complaint also named the Company's former Senior Vice President and Treasurer as an additional defendant who was later dismissed from the case. On June 24, 2013, defendants moved to dismiss the Class Action Complaint. Briefing on the motions to dismiss was completed on August 9, 2013. Although the Company believed it had meritorious defenses to the asserted claims in the securities class actions in the United States, the defendants and plaintiffs agreed to the terms of a settlement and on February 5, 2014 executed a settlement agreement that, following approval by the Western District of North Carolina, would resolve all claims in the securities class actions pending there (the "Settlement"). The Settlement provided that the defendants would make a set cash payment totaling $5,500,000, all from insurance proceeds, to settle all of the securities class actions, and full and complete releases would be provided to defendants. On March 11, 2014, the Western District of North Carolina issued a preliminary order approving the Settlement, and scheduled a hearing for August 6, 2014. That same day, the Western District of North Carolina also issued an order terminating defendants’ pending motions to dismiss the Class Action Complaint as moot in light of the Settlement. On August 6, 2014, following a hearing, the Western District of North Carolina approved the Settlement, and issued an Order and Final Judgment that, among other things, dismissed the securities class actions pending in the United States with prejudice and provided for full and complete releases to defendants. The Arsenault derivative action is still pending.was voluntarily dismissed without compensation to any party.
On June 11, 2013, an individual action was filed in the U.S.United States District Court for the Southern District of Florida captioned Miller, et al. v. Swisher Hygiene, Inc., et al., No. 0:13-CV-61292-JAL, against the Company, its former CEO and former CFO, and a former Company director, bringing state and federal claims founded on the allegations that in deciding to sell their company to the Company, plaintiffs relied on defendants' statements about such things as the Company's accounting and internal controls, which, in light of the Company’sCompany's restatement of its financial statements, were false. On July 17, 2013, the Company notified the United States Judicial Panel on Multidistrict Litigation ("MDL PanelPanel") of this action, and requested that it be transferred and centralized in the Western District of North Carolina with the other actions pending there. On July 23, 2013, the MDL Panel issued a Conditional Transfer Order (the "Miller CTO"), conditionally transferring the case to the Western District of North Carolina. On July 29, 2013, plaintiffs notified the MDL Panel that they would seek to vacate the Miller CTO. In light of the proceedings in the MDL Panel, defendants requested that the Southern District of Florida stay all proceedings pending the MDL Panel's ruling. On August 6, 2013, the Southern District of Florida issued a stay of all proceedings pending a ruling by the MDL Panel. On October 2, 2013, following briefing on the issue of whether the Miller CTO should be vacated, the MDL Panel issued an order transferring the action to the Western District of North Carolina. The Company and the individual defendants filed motions to dismiss the complaint on March 20, 2014. Briefing on the motions to dismiss was completed on May 12, 2014. On June 2, 2014, plaintiffs filed a motion with the Western District of North Carolina seeking a suggestion for remand from that Courtcourt to the MDL Panel. Briefing on that motion was completed on June 26, 2014. Oral argument on the motions to dismiss and motion for suggestion for remand were heard on July 22, 2014. On August 5, 2014, the Western District of North Carolina denied plaintiffs' motion for suggestion for remand. On October 22, 2014, the Company filed a notice of supplemental authority in support of its motion to dismiss the complaint in this action.complaint. On November 4, 2014, plaintiffs filed a response to the notice of supplemental authority. On July 11, 2013, a purported stockholder filed a derivative action on behalf of the Company in the General Court of Justice, Superior Court Division in the State of North Carolina, Mecklenburg County, captioned Borthwick v. Berrard, et. al., No. 13-CVS-12397. The action asserted claims against the Company as a nominal defendant, its former CEO and former CFO, and certain former and current Company directors for breaches of fiduciary duties, gross mismanagement, abuse of control, waste of corporate assets, and aiding and abetting thereof in connection with the Company's restatement of its financial statements. Among other things, the action sought damages on behalf of the Company and an order directing the Company to implement corporate governance reforms. On August 7, 2013, the Company filed a notice to remove the action from the General Court of Justice, Superior Court Division in the State of North Carolina, Mecklenburg County to the Western District of North Carolina. On August 30, 2013, the Company moved to consolidate this action with the actions previously consolidated before8, 2015, the Western District of North Carolina ruled on the motions to dismiss. The Western District of North Carolina dismissed plaintiffs' federal securities claims and to staycertain of their state law claims. All claims against the action. On September 25, 2013,former CFO were dismissed. After issuing its ruling, the Western District of North Carolina grantedrecommended by letter to the Company's motionMDL Panel that the action be transferred back to consolidate and stay the action. On October 23, 2014, following its approval of the settlement of the securities class actions, the WesternSouthern District of North Carolina set a briefing schedule whereby the Company, as nominal defendant, filed a motion to dismiss the derivative action on November 4, 2014. Pursuant to the schedule, the remaining defendants did not need to file any motions to dismiss until after the Court ruled on the Company's motion.Florida. On December 10, 2014, the parties filed a Stipulation and Proposed Order for the dismissal of the complaint filed in this action with prejudice. On December 11, 2014,July 16, 2015, the Western District of North Carolina issued an order staying all proceedings in the action pending a determination by the MDL Panel on its recommendation. Thereafter, the MDL Panel issued a Conditional Remand Order, remanding the action to the Southern District of Florida, which was finalized and filed on July 28, 2015. On September 4, 2015, as requested by the Southern District of Florida, the parties submitted a Joint Status Report. On September 9, 2015, the Southern District of Florida issued an Order to Show Cause as to why the remaining state law claims should not be dismissed without prejudice pursuant to 28 U.S.C. § 1367(c)(3). On September 18, 2015, the parties filed their respective responses to the Order to Show Cause. On September 21, 2015, the Southern District of Florida issued an order dismissing the Borthwickremaining state law claims in the action with prejudice. without prejudice on subject matter jurisdiction grounds pursuant to 28 U.S.C. § 1367(c)(3). On December 17, 2013,November 6, 2015, the parties reached a purported stockholder commenced a putative securities class action on behalf of purchaserssettlement of the matter. The terms of the settlement are confidential. The Company's common stockfinancial obligation under the settlement will be covered by insurance and accordingly, the terms of the settlement did not have a material effect on the Toronto Stock Exchange or any other Canadian trading platforms in the Ontario Superior Court of Justice, captioned Edwards v. Swisher Hygiene, Inc., et al., CV 13-20282 CP, against the Company, the former CEO and former CFO. The action alleges claims under Canadian law for alleged misrepresentations of the Company's financial position relating to its business acquisitions. On February 13, 2014, a Fresh Statement of Claim and Fresh Notice of Action were filed, adding an additional named plaintiff. On March 28, 2014, another purported stockholder commenced a putative securities class action on behalf of purchasers of the Company's common stock on the Toronto Stock Exchange or any other Canadian trading platforms in the Ontario Superior Court of Justice, captioned Phillips v. Swisher Hygiene, Inc., et al., CV 14-00501096-0000, against the Company, the former CEO, the former CFO and the Company's former Senior Vice President and Treasurer. The action alleges claims under Canadian law stemming from the Company's restatement. Although the Company believed it had meritorious defenses to the asserted claims in the two securities class actions pending in Canada, the defendants agreed to terms of settlement and executed a settlement agreement resolving all claims in both securities class actions pending there, which was approved by the Ontario Superior Court of Justice by Order dated February 13, 2015 (the "Canadian Settlement"). The Canadian Settlement provides that defendants will make a set cash payment totaling $0.7 million, including legal fees, all from insurance proceeds, to settle all of the Canadian securities class actions, with full and complete releases provided to the defendants. Notice has been given of the Canadian Settlement.position.
Other MattersOn September 8, 2015, a lawsuit seeking to be certified as a class action (Paul Berger v. Swisher Hygiene Inc., et al., Case No. 2015 CH 13325 (Ill. Cir. Ct. Cook Co.)) was filed in the Circuit Court of Cook County, Illinois County Department, Chancery Division by Paul Berger, on behalf of himself and all others similarly situated, against Swisher Hygiene Inc., the members of Swisher Hygiene Inc.’s board of directors, individually, and Ecolab in connection with the Sale Transaction. The plaintiff has alleged that (i) faced with an ongoing investigation by the Securities and Exchange Commission and the USAO, the individual defendants embarked upon a self-interested scheme to sell off Swisher International, Inc.’s assets and to liquidate Swisher Hygiene Inc., (ii) the individual defendants, through an alleged insufficient process, caused Swisher Hygiene Inc. to agree to sell substantially all of its assets for insufficient consideration, (iii) each member of Swisher Hygiene Inc’s. Board of Directors is interested in the Sale Transaction and the plan of dissolution, and (iv) the proxy statement was materially misleading and/or incomplete. The causes of action set forth in the complaint are (i) a claim for breaches of the fiduciary duties of good faith, loyalty, fair dealing and due care, (ii) a claim for failure to disclose, and (iii) a claim against Ecolab for aiding and abetting breaches of fiduciary duty. The plaintiff sought to enjoin the consummation of the Sale Transaction unless and until defendants provide all material facts in the proxy statement, and the plaintiff also seeks compensatory and/or rescissory damages as allowed by law for the plaintiff. This summary is qualified by reference to the full text of the complaint as filed with the Court. On October 6, 2015, Defendants filed a motion to dismiss the Illinois action given that a substantially similar action, Raul, was pending in North Carolina. On December 15, 2015, the parties agreed to hold defendants’ motion to dismiss in abeyance until the court in the Raul action ruled on the pending motions to dismiss in that case, described below. A status hearing is scheduled for February 26, 2016. The Company believes the claims alleged by the plaintiff are without merit and it intends to vigorously defend against them. On September 11, 2015, a derivative and putative class action (Malka Raul v. Swisher Hygiene Inc. et al., Case No. 15-CVS-16703 (Superior Court, Mecklenburg County, North Carolina)) was filed in the General Court of Justice, Superior Court Division, Mecklenburg County, North Carolina by Malka Raul. The action was brought derivatively on behalf of Swisher Hygiene Inc., and individually and on behalf of all others similarly situated, against Swisher Hygiene Inc., the members of Swisher Hygiene, Inc’s board of directors, individually, and Ecolab in connection with the Sale Transaction. The plaintiff has alleged that (i) the sale of Swisher International, Inc. to Ecolab contemplated by the purchase agreement is unfair and inequitable to the Swisher Hygiene Inc’s stockholders and constitutes a breach of the fiduciary duties of the directors in the sale of Swisher International, Inc. (ii) defendants have exacerbated their breaches of fiduciary duty by agreeing to lock up the Sale Transaction with deal protection devices that preclude other bidders from making a successful competing offer for Swisher International, Inc. and preclude stockholders from voting against the Sale Transaction, (iii) the Sale Transaction will divest the Swisher Hygiene Inc’s stockholders of their ownership interest in Swisher International, Inc. for inadequate consideration; (iv) each of the defendants violated and continues to violate applicable law by directly breaching and/or aiding and abetting the defendants’ breaches of fiduciary duties of loyalty, due care, independence, good faith and fair dealings, (v) the Sale Transaction is the product of a flawed process that was designed to sell Swisher International, Inc. to Ecolab on terms detrimental to plaintiff and the other Swisher Hygiene Inc’s stockholders, (vi) the proxy statement fails to provide Swisher Hygiene Inc’s stockholders with material information and/or provides them with materially misleading information and (vii) the proxy statement fails to provide Swisher Hygiene Inc.’s stockholders with all material information concerning the financial analysis of Cassel Salpeter & Co., LLC. The causes of action set forth in the complaint are (i) a claim for breach of fiduciary duty against the individual defendants, (ii) a claim for aiding and abetting breaches of fiduciary duty against Ecolab, (iii) a derivative claim for breach of fiduciary duties against the individual defendants, and (iv) a derivative claim for unjust enrichment against the individual defendants. The plaintiff primarily sought to (i) enjoin defendants from consummating the Sale Transaction unless and until the individual defendants adopt and implement a fair procedure or process to sell Swisher International, Inc., (ii) direct the individual defendants to exercise their fiduciary duties to obtain a transaction which is in the best interests of Swisher Hygiene Inc. and its stockholders and (iii) rescind, to the extent already implemented, the purchase agreement or any of the terms thereof. The plaintiff also seeks costs and disbursements, including reasonable attorneys’ and experts fees, and such other equitable and/or injunctive relief as the Court may deem just and proper. This summary is qualified by reference to the full text of the complaint as filed with the Court. On November 5, 2015, defendants in the Raul case filed motions to dismiss, and on November 23, 2015, the plaintiff filed a motion to dismiss as moot and a motion for an award of attorney’s fees. Oral arguments of the plaintiff’s and defendants’ motions occurred on January 12, 2016. In supplemental briefing plaintiff advised the Court that it intended to withdraw its motion to dismiss and amend its complaint to include “newly discovered information.” On January 28, 2016, the Court granted Ecolab’s motion to dismiss and plaintiff’s permission to file an amended complaint, preserved defendants’ motions to dismiss for future consideration and deferred consideration of plaintiff’s motion for award of attorneys’ fees. On February 11, 2016, the plaintiff in the Raul case filed her amended complaint bringing the action derivatively on behalf of Swisher Hygiene Inc., individually and on behalf of all others similarly, against the members of Swisher Hygiene Inc.’s board of directors and Swisher Hygiene Inc. The plaintiff alleged a claim for declaratory relief against the individual defendants, a claim for breach of fiduciary duty against the individual defendants, and derivative claims for breach of fiduciary duties, unjust enrichment, abuse of control, and waste relating to the Sale Transaction and the Plan of Dissolution. On February 24, 2016, following a review of the amended complaint, defense counsel advised plaintiff’s counsel of certain factual and legal errors contained in the amended complaint, and further advised of defendants’ intention to seek reimbursement for expenses, including attorneys’ fees, if the amended complaint was not withdrawn. On February 29, 2016, defendant filed a notice of voluntary dismissal and, on March 3, 2016, the amended complaint was dismissed with prejudice as to the plaintiff, with each side bearing its own costs and expenses. On October 28, 2015, a civil suit was filed against Swisher Hygiene Inc. and related entities in the Commonwealth of Puerto Rico, Gerardo Jimenez Pacheco v. Service Puerto Rico, LLC, et al. Civil No. D AC2015-2256 (Commonwealth of Puerto Rico). Plaintiff alleges that he sold assets of his privately held company to Service Puerto Rico in February 2011 in exchange for cash and a $375,000 note that was convertible into Swisher Hygiene Inc., shares of common stock. Plaintiff alleges breach of contract, defect in consent, joint and several liability, and abuse of process, all of which appear to be based on plaintiff’s reliance on Swisher Hygiene Inc.’s 2011 financial statements that were subsequently withdrawn and restated. Plaintiff requested a total of $475,000 in damages for all causes of action, plus attorney’s fees and pre-judgment interests. On February 1, 2016, Defendants filed a motion to dismiss and believe that plaintiff’s suit is without merit, is bound by the settlement on August 6, 2014 of the class action litigation captioned In re Swisher Hygiene, Inc. Securities and Derivative Litigation, MDL No. 2384, and if not bound by that settlement, is barred by the applicable statute of limitations. Defendants intend to vigorously defend against Plaintiff’s claims. The Honeycrest Holdings, Ltd. v. Integrated Brands, Inc. matter relates to a longstanding dispute between Honeycrest Holdings, Ltd. (“Honeycrest”) and Integrated Brands, Inc. (“Integrated”) f/k/a Steve’s Homemade Ice Cream, Inc. involving a license granted by Honeycrest to Integrated in 1990, which licensed the manufacture and sale of ice cream products by Honeycrest in the United Kingdom. In 1998 Honeycrest filed an action against Integrated (Honeycrest Holdings, Ltd. v. Integrated Brands, Inc., New York Supreme Court, Queens County (Index No. 5204/1998)) alleging a breach of the licensing agreement; Integrated responded by denying the material allegations and alleging Honeycrest had breached the license agreement. Subsequently, Integrated merged with a subsidiary of Coolbrands International Inc (“Coolbrands”) and in 2001, Honeycrest filed a similar action against Coolbrands and Integrated (Honeycrest Holdings, Ltd. v. Coolbrands International, Inc., et al., New York Supreme Court, Queens County (Index No. 29666/01)). The actions against Integrated and Coolbrands have been combined (although not consolidated) for joint trial. In 2010, Coolbrands (formerly a Canadian corporation) was domesticated in the State of Delaware as Swisher Hygiene Inc. and thereafter acquired Swisher International Inc. In the Sale Transaction, Swisher Hygiene Inc. sold all of the stock of Swisher International Inc. to Ecolab Inc., but retained indirect ownership of Integrated. The litigation involving Honeycrest and Integrated and/or Coolbrands spans 17 years, has been episodically dormant with periods of extended discovery, motion practice, mediation, attempted settlements and other activities. In January 2016, Honeycrest filed a motion to amend the Coolbrands complaint to add Swisher Hygiene Inc. as a defendant in that case. Swisher Hygiene Inc.'s opposition papers were served on February 29, 2016. Swisher Hygiene Inc. believes any possible claim by Honeycrest against it is without merit and intends to vigorously defend itself against any such claims. The foregoing summary is qualified in its entirety by the pleadings that have been filed in the foregoing cases. On October 7, 2015, the Company entered into a Deferred Prosecution Agreement (the “DPA”) with the United States Attorney’s Office for the Western District of North Carolina (“USAO”) relating to the USAO’s investigation of the Company’s accounting practices. Under the terms of the DPA, the USAO filed, but deferred prosecution of, a criminal information charging Swisher Hygiene Inc. with conspiracy to commit securities fraud and other charges relating to the Company’s accounting and financial reporting practices reflected in the Company's originally filed Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, June 30, 2011, and September 30, 2011. Pursuant to the DPA, the Company agreed to pay a $2 million fine to the USAO payable in four annual installments of $500,000 each if the Company is financially able to do so. Pursuant to the terms of the DPA, the fine became immediately due and payable in full upon a change in control of the Company. As a result, the fine was paid in full upon the closing of the Sale Transaction, and we are awaiting dismissal of the Bill of Information pursuant to the terms of the DPA. In 2012, the Company was contacted by the staff of the Atlanta Regional Office of the SEC and by the United States Attorney's Office for the Western District of North Carolina (the "U.S. Attorney's Office") after publicly announcing the Audit Committee's internal review and the delays in filing our periodic reports. The Company has been asked to make certain individuals available and to provide certain information about these matters to the SEC and the U.S. Attorney's Office.SEC. The Company is fully cooperating with the SEC and the U.S. Attorney's Office.SEC. Any action by the SEC the U.S. Attorney's Office or other government agency could result in criminal or civil sanctions against the Company and/or certain of its current or former officers, directors or employees. Purchase Obligations and Leases In connection with a distribution agreement entered into in December 2010, the Company provided a guarantee that the distributor's operating cash flows associated with the agreement would not fall below certain agreed-to minimums, subject to certain pre-defined conditions, over the ten year term of the distribution agreement. If the distributor's annual operating cash flow does fall below the agreed-to annual minimums, the Company will reimburse the distributor for any such short fall up to a pre-designated amount. As discussed in Note, 97 “Fair Value Measurements” no value was assigned to the fair value of the guarantee at December 31, 2014 and December 31, 2013 based on a probability assessment of the projected cash flows. Management currently does not believe that it is probable that any amounts will be paid under thisThis agreement and thus there is no amount accrued forwas assumed by Ecolab in connection with the guarantee in the Consolidated Financial Statements.Sale Transaction. The Company entered into a Manufacturing and Supply Agreement (the "Cavalier Agreement") with another plant in conjunction with its acquisition of Sanolite in July of 2011. The Cavalier Agreement, which was scheduled to expire on December 31, 2012, was extended for an additional two year period with an automatic 18-month renewal term and a 6-month termination option. The Cavalier Agreement providesprovided for pricing adjustments, up or down, on the first of each month based on the vendor's actual average product costs incurred during the prior month. Additional product payments made by the Company due to pricing adjustments under the Cavalier Agreement havewere not been significant and havedid not representedrepresent costs materially above the market price for such products. The Cavalier Agreement was terminated in September 2014 pursuant to the terms of the agreement. The Company leasesleased its headquarters and other facilities, equipment and vehicles under operating leases that expireexpired at varying times through 2024. Future minimum lease payments for operatingAll outstanding leases that had initialwere either cancelled or remaining non-cancelable lease termstransferred to Ecolab in excess of one year as of December 31, 2014 are: 2015 - $5.8 million, 2016 - $4.8 million , 2017 - $3.5 million, 2018 - $2.5 million, 2019 - $2.3 million, and thereafter - $2.3 million.conjunction with the Sale Transaction. Total rent expense for operating leases, including those with terms of less than one year was $6.5 million, $6.3$5.6 million and $6.2$6.5 million for the years ended December 31, 2015 and 2014, 2013respectively, and 2012, respectively.are included in discontinued operations in the consolidated statement of operations and comprehensive loss. NOTE 1714 — OTHER EXPENSE, NET Other expense of continuing operations consists of the following for the years ended December 31, 2014, 20132015 and 2012:2014: | | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | | Interest Income | | $ | 9 | | | $ | 41 | | | $ | 75 | | Interest Expense | | | (387 | ) | | | (485 | ) | | | (3,406 | ) | Realized and unrealized gain/(loss) on fair value of convertible notes | | | - | | | | - | | | | 66 | | Earn-out | | | - | | | | - | | | | 170 | | Foreign Currency | | | (167 | ) | | | (5 | ) | | | (15 | ) | Loss from impairment | | | - | | | | - | | | | (507 | ) | Other | | | (1,118 | ) | | | (205 | ) | | | 524 | | Total other expenses | | $ | (1,663 | ) | | $ | (654 | ) | | $ | (3,093 | ) |
| | 2015 | | | 2014 | | | | | | | | | Interest Expense | | $ | (65 | ) | | $ | (134 | ) | Fine Paid to the United States of America | | | (2,000 | ) | | | - | | Total Other Expenses | | $ | (2,065 | ) | | $ | (134 | ) |
“Other” primarily
The “Fine Paid to the United States of America” is pursuant to the terms of a previously announced Deferred Prosecution Agreement entered into between the Company and the United States Attorney’s Office for the Western District of North Carolina. Other income (expense) of discontinued operations consists of the loss related to the sale of assets held for salefollowing for the years ended December 31, 20142015 and 2013 as described further in Note 2, “Discontinued Operations and Assets Held for Sale”. During fiscal year 2012, a fire occurred at a linen warehouse of one of the Company’s subsidiaries in Tampa, Florida. The fire heavily damaged the leased building and its contents requiring the building to be demolished. After consideration of the insurance recoveries received, we recorded a gain in other (expense), net on the involuntary conversion of assets of approximately $0.6 million in the fourth quarter of 2012. 2014: | | 2015 | | | 2014 | | | | | | | | | Interest Income | | $ | - | | | $ | 9 | | Interest Expense | | | (334 | ) | | | (253 | ) | Foreign Currency | | | (620 | ) | | | (167 | ) | Gain (Loss) on Sale of Assets | | | 2,080 | | | | (1,070 | ) | Loss on Extinguishment of Revolving Credit Facility | | | (923 | ) | | | - | | Other | | | 514 | | | | (48 | ) | Total Other Income (Expenses) | | $ | 717 | | | $ | (1,529 | ) |
“Other” primarily consists of a legal settlement received and a refund of insurance in the year ended December 31, 2015. NOTE 1815 — GEOGRAPHIC INFORMATION The following table includes our discontinued operation’s revenue from geographic locations for the years ended December 31, 2014, 2013,2015 and 20122014 were: | | 2015 | | | 2014 | | Revenue | | | | | | | United States | | $ | 138,449 | | | $ | 184,854 | | Canada | | | 4,264 | | | | 8,903 | | Total revenue | | $ | 142,713 | | | $ | 193,757 | |
| | 2014 | | | 2013 | | | 2012 | | Revenue | | | | | | | | | | United States | | $ | 184,854 | | | $ | 203,453 | | | $ | 220,624 | | Canada | | | 8,903 | | | | 10,235 | | | | 9,897 | | Total revenue | | $ | 193,757 | | | $ | 213,688 | | | $ | 230,521 | |
The following table summarizes our discontinued operation’s foreign long-lived assets, which relate to our Canadian subsidiaries, as of December 31, 2014 and 2013: | | 2014 | | | 2013 | | Long-Lived Assets | | | | | | | Property and equipment, net | | $ | 739 | | | $ | 589 | | Goodwill | | $ | - | | | $ | 3,291 | | Other intangibles, net | | $ | 528 | | | $ | 1,478 | |
2014. In conjunction with the Sale Transaction, there are no remaining long-lived assets as of December 31, 2015. | | 2014 | | Long-Lived Assets | | | | Property and equipment, net | | $ | 739 | | Other intangibles, net | | | 528 | | Total long-lived assets | | $ | 1,267 | |
NOTE 1916 — QUARTERLY FINANCIAL DATA (UNAUDITED) 2014 | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | | | Year | | Revenue | | $ | 48,295 | | | $ | 49,955 | | | $ | 49,650 | | | $ | 45,857 | | | $ | 193,757 | | Gross profit (1) | | $ | 26,483 | | | $ | 26,982 | | | $ | 26,979 | | | $ | 24,212 | | | $ | 104,656 | | Loss from continuing operations | | $ | (13,038 | ) | | $ | (14,706 | ) | | $ | (7,613 | ) | | $ | (9,877 | ) | | $ | (45,234 | ) | Net loss from continuing operations | | $ | (13,792 | ) | | $ | (15,147 | ) | | $ | (7,776 | ) | | $ | (10,093 | ) | | $ | (46,808 | ) | Basic and diluted loss per share | | $ | (0.78 | ) | | $ | (0.86 | ) | | $ | (0.44 | ) | | $ | (0.56 | ) | | $ | (2.64 | ) | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | | | | | | | | | | | | | | | | | | Revenue | | $ | 52,022 | | | $ | 55,386 | | | $ | 55,916 | | | $ | 50,364 | | | $ | 213,688 | | Gross profit (1) | | $ | 29,457 | | | $ | 30,987 | | | $ | 30,682 | | | $ | 26,977 | | | $ | 118,103 | | Loss from operations | | $ | (16,742 | ) | | $ | (14,456 | ) | | $ | (12,778 | ) | | $ | (108,496 | ) | | $ | (152,472 | ) | Net loss from continuing operations | | $ | (17,240 | ) | | $ | (14,885 | ) | | $ | (13,192 | ) | | $ | (105,215 | ) | | $ | (150,532 | ) | Basic and diluted loss per share | | $ | (0.98 | ) | | $ | (0.88 | ) | | $ | (0.75 | ) | | $ | (5.94 | ) | | $ | (8.55 | ) |
2015 | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | | | Year | | Loss from continuing operations | | $ | (2,226 | ) | | $ | (1,675 | ) | | $ | (2,506 | ) | | $ | (2,854 | ) | | $ | (9,261 | ) | Net loss from continuing operations | | $ | (2,271 | ) | | $ | (1,717 | ) | | $ | (4,589 | ) | | $ | (2,749 | ) | | $ | (11,326 | ) | Net loss from discontinued operations | | $ | (6,560 | ) | | $ | (5,973 | ) | | $ | (27,191 | ) | | $ | (6,540 | ) | | $ | (46,264 | ) | Basic and diluted loss per share - continuing operations | | $ | (0.13 | ) | | $ | (0.10 | ) | | $ | (0.26 | ) | | $ | (0.15 | ) | | $ | (0.64 | ) | Basic and diluted loss per share - discontinued operations | | $ | (0.37 | ) | | $ | (0.34 | ) | | $ | (1.53 | ) | | $ | (0.37 | ) | | $ | (2.61 | ) | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | | | | | | | | | | | | | | | | | | Loss from continuing operations | | $ | (2,425 | ) | | $ | (1,461 | ) | | $ | (1,177 | ) | | $ | (1,301 | ) | | $ | (6,364 | ) | Net loss from continuing operations | | $ | (2,475 | ) | | $ | (1,484 | ) | | $ | (1,210 | ) | | $ | (1,329 | ) | | $ | (6,498 | ) | Net loss from discontinued operations | | $ | (11,317 | ) | | $ | (13,662 | ) | | $ | (6,567 | ) | | $ | (8,764 | ) | | $ | (40,310 | ) | Basic and diluted loss per share - continuing operations | | $ | (0.14 | ) | | $ | (0.08 | ) | | $ | (0.07 | ) | | $ | (0.08 | ) | | $ | (0.37 | ) | Basic and diluted loss per share - discontinued operations | | $ | (0.64 | ) | | $ | (0.77 | ) | | $ | (0.37 | ) | | $ | (0.49 | ) | | $ | (2.27 | ) |
(1) Revenue less cost of sales, which is exclusive of route expense and related depreciation and amortization.
The following non-recurring transactions occurred during the fourth quarter of fiscal year 2013: (i) a $93.2 million non-cash goodwill impairment charge recordedCertain amounts have been reclassified in conjunctionprior quarters to be consistent with the performancecurrent discontinued operations classification as of the Company’s annual impairment test that is further described in Note 5, “Goodwill and Other Intangibles” in the Notes to the Consolidated Financial Statements and (ii) a $3.1 million impairment charge related to assets held for sale that is further described in Note 2, Discontinued Operations and Assets Held for Sale,” in the Notes to the Consolidated Financial Statements.December 31, 2015.
NOTE 2017 – SUBSEQUENT EVENT During March 2015, the Board of Directors of the Company approved a board resolution to sell its remaining non-core linen operation. During the first quarter of 2015, in accordance with ASC 360, Property, Plant and Equipment, these assets will be classified as assets held for sale and will be adjusted to the lower of historical carrying amount or fair value. The estimated fair value is derived based on the assessment of potential net selling prices. The carrying value of the assets will be compared to the estimated fair value and if applicable, any write down will be recognized in the first quarter of 2015. The Company expects the linen operation will be sold in the second quarter of 2015. The carrying value of the major classes of the assets are as follows:EVENTS
| | December 31, | | | | 2014 | | Accounts receivable, net | | | 445 | | Property and equipment, net | | | 1,957 | | Customer relationships, net | | | 477 | | Other intangibles, net | | | 330 | | Total | | $ | 3,209 | |
Resignation and appointment of officers On March 26, 2015,February 19, 2016, the Company entered into a letter agreement, datedSeparation Agreement and Release with Mr. Pierce pursuant to which Mr. Pierce will continue to serve as of March 25, 2015 ("Letter Agreement"), with its lender, Siena Lending Group LLC, in respectPresident and Chief Executive Officer of the occurrenceCompany under the same terms as his current employment agreement through the date of a Springing DACA Event, as such term is definedhis resignation, and Mr. Pierce, or his assignees, will receive severance in the Credit Facility. The Letter Agreement temporarily waives, until April 10, 2015, certain cash management requirementsaggregate amount of $234,615, which will be paid in seven installments on a monthly basis. On February 26, 2016, Mr. Pierce tendered his resignation as Chief Executive Officer and certain enhanced reporting requirements that would otherwise go into effect uponPresident of the occurrence of a Springing DACA Event. Company, effective March 31, 2016. F-34On February 19, 2016, Mr. Nanovsky resigned as Senior Vice President, Chief Financial Officer and Secretary of the Company, effective March 31, 2016. As a result, the Executive Services Agreement between the Company and The SCA Group, LLC, effective June 9, 2013, pursuant to which Mr. Nanovsky provides his services to the Company will be terminated effective March 31, 2016.
On February 26, 2016, the Board of Directors appointed Richard Handley as President (principal executive officer) and Secretary of the Company, effective April 1, 2016. The Board of Directors is currently finalizing the terms of a consulting agreement with Mr. Handley. Also, the Company is currently reviewing candidates for the position of Chief Financial Officer. Termination of 2010 Stock Incentive Plan Effective February 19, 2016, the SIP was terminated by the Board of Directors. All stock options and restricted stock units were cancelled before the plan was terminated. See Note 10, “Equity Matters,” for further information regarding the SIP. Termination of Retirement Plan The Company sent a notice of plan termination to participants in December 2015 and expects to terminate the Plan in 2016. In connection with the termination the Company will fund the Plan so there will be no minimum regulatory funding requirement in 2016. Since the Company will fund the total benefit obligation, there will be no expected benefit payments under the Plan in future years. See Note 11, “Retirement Plan” for further information regarding the Plan. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE THREETWO YEARS ENDED DECEMBER 31, 20142015 In thousands | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at the Beginning of the Year | | | Charged to Costs and Expenses | | | Deductions from Allowance | | | Sold to Ecolab | | | Balance at the End of the Year | | 31-Dec-15 | | | | | | | | | | | | | | | | | Allowances for receivables | | | $ | 976 | | | $ | 935 | | | $ | 980 | | | $ | 931 | | | $ | - | | Other allowances | | | | 816 | | | | - | | | | 166 | | | | 650 | | | | - | | | | Balance at the Beginning of the Year | | | Charged to Costs and Expenses | | | Deductions from Allowance | | | Balance at the End of the Year | | | $ | 1,792 | | | $ | 935 | | | $ | 1,146 | | | $ | 1,581 | | | $ | - | | 31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowances for receivables | | $ | 1,999 | | | $ | 196 | | | $ | 1,219 | | | $ | 976 | | | $ | 1,999 | | | $ | 196 | | | $ | 1,219 | | | $ | - | | | $ | 976 | | Other allowances | | | 892 | | | | - | | | | 76 | | | | 816 | | | | 892 | | | | - | | | | 76 | | | | - | | | | 816 | | | | $ | 2,891 | | | $ | 196 | | | $ | 1,295 | | | $ | 1,792 | | | $ | 2,891 | | | $ | 196 | | | $ | 1,295 | | | $ | - | | | $ | 1,792 | | 31-Dec-13 | | | | | | | | | | | | | | | | | | Allowances for receivables | | $ | 2,335 | | | $ | 936 | | | $ | 1,272 | | | $ | 1,999 | | | Other allowances | | | 437 | | | | 455 | | | | - | | | | 892 | | | | | $ | 2,772 | | | $ | 1,391 | | | $ | 1,272 | | | $ | 2,891 | | | 31-Dec-12 | | | | | | | | | | | | | | | | | | Allowances for receivables | | $ | 2,185 | | | $ | 2,396 | | | $ | 2,246 | | | $ | 2,335 | | | Other allowances | | | 471 | | | | - | | | | 34 | | | | 437 | | | | | $ | 2,656 | | | $ | 2,396 | | | $ | 2,280 | | | $ | 2,772 | | |
The allowance accounts are included in assets of discontinued operations in the consolidated balance sheet. As a result of the Sale Transaction, the allowance accounts were assumed by Ecolab. EXHIBIT INDEX Exhibit Number | | Description | 10.3810.43 | | Second Amendment to EmploymentDeferred Prosecution Agreement, dated October 7, 2015, by and between the United States of America and Swisher Hygiene Inc. and William M. Pierce, dated January 31, 2015. | 10.39 | | Letter Agreement, dated as of March 25, 2015, by and among Siena Lending Group LLC and the Borrowers listed thereto. | 21.1 | | Subsidiaries of Swisher Hygiene Inc. | 23.1 | | Consent of BDO USA, LLP. | 31.1 | | Section 302 Certification of Chief Executive Officer. | 31.2 | | Section 302 Certification of Chief Financial Officer. | 32.1 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | 32.2 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | 101.INS | | XBRL Instance Document. | 101.SCH | | XBRL Taxonomy Extension Schema. | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase. | 101.LAB | | XBRL Taxonomy Extension Label Linkbase. | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. |
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