UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _________
Commission file number 1-1363
Envirosource, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 34-0617390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1155 Business Center Drive, Horsham, Pennsylvania 19044-3454
(Address of principal executive offices)(Zip Code)
(215) 956-5500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- ----
The number of shares outstanding of the Registrant's Common Stock as of the
close of business on May 8, 2000 was 5,813,394.
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,700 $ 2,125
Accounts receivable, less allowance
for doubtful accounts 32,355 32,829
Recoverable trust fund - 15,173
Other current assets 3,649 3,645
------------ ------------
Total current assets 39,704 53,772
Property, plant and equipment, at cost 261,750 254,478
Less accumulated depreciation (156,575) (151,286)
------------ ------------
105,175 103,192
Goodwill, less accumulated amortization 108,509 109,586
Other assets 10,979 11,707
------------ ------------
$ 264,367 $ 278,257
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 9,834 $ 14,933
Accrued interest 8,032 1,323
Other accruals and current liabilities 23,891 27,269
Current portion of debt 154 6,286
------------ ------------
Total current liabilities 41,911 49,811
Long-term debt:
Senior Notes due 2003 270,000 270,000
Other long-term debt 8,659 8,666
------------ ------------
Total long-term debt 278,659 278,666
Other long-term liabilities 33,356 35,343
Stockholders' deficit:
Common stock 291 291
Capital in excess of par value 175,969 175,969
Accumulated deficit (264,591) (260,522)
Accumulated other comprehensive losses (1,228) (1,211)
Stock purchase loan receivable from officer - (90)
------------ ------------
Total stockholders' deficit (89,559) (85,563)
------------ ------------
$ 264,367 $ 278,257
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(Dollars and shares in thousands, except for per share amounts)
Three Months Ended
March 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues $ 50,483 $ 48,283
----------- -----------
Expenses:
Cost of revenues 36,564 33,179
Selling, general and administrative 3,518 4,641
Depreciation and amortization
(less interest amortization) 7,075 8,670
Unusual charges - 2,964
----------- -----------
Total expenses 47,157 49,454
----------- -----------
Operating income (loss) 3,326 (1,171)
Interest income 206 183
Interest expense (7,358) (7,807)
----------- -----------
Loss before income taxes (3,826) (8,795)
Income tax expense (243) (269)
----------- -----------
Net loss $ (4,069) $ (9,064)
=========== ===========
Basic and diluted net loss per share $ (0.70) $ (1.56)
=========== ===========
Weighted average shares 5,813 5,813
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Three Months Ended
March 31,
---------------------------
2000 1999
------------ ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (4,069) $ (9,064)
Adjustments to reconcile net loss
to cash provided by operating activities:
Depreciation 5,741 6,379
Amortization 1,773 2,774
Unusual charges (payments), net (1,132) 1,298
Changes in operating working capital (26) 5,547
Other, net 66 162
------------ ------------
Cash provided by operating activities 2,353 7,096
------------ ------------
INVESTING ACTIVITIES:
Property, plant and equipment:
Additions (8,112) (5,358)
Proceeds from dispositions 438 735
Closure trust fund recovery, net 15,149 634
Cash flows related to IU International
acquisition, net (1,852) (625)
Other (262) (385)
------------ ------------
Cash provided by (used for) investing
activities 5,361 (4,999)
------------ ------------
Cash provided before financing activities 7,714 2,097
------------ ------------
FINANCING ACTIVITIES:
Revolving credit facility:
Borrowings 7,394 22,000
Repayments (13,379) (26,000)
------------ ------------
(5,985) (4,000)
Other debt repayment (154) (394)
------------ ------------
Cash used for financing activities (6,139) (4,394)
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the period 1,575 (2,297)
Beginning of year 2,125 5,134
------------ ------------
End of period $ 3,700 $ 2,837
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
ENVIROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited, and
have been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
have been included. Certain amounts reported in prior periods have been
reclassified for comparative purposes. Quarterly operating results are not
necessarily indicative of the results that may be expected for the full year.
Quarterly financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, as filed with
the Securities and Exchange Commission.
NOTE 2 - COMPREHENSIVE LOSS
The following table presents total comprehensive losses for the three-month
periods ended March 31, 2000 and 1999 (dollars in thousands):
Three Months Ended
March 31,
--------------------------
2000 1999
----------- -----------
Net loss $ (4,069) $ (9,064)
Canadian currency translation adjustment (17) 95
----------- -----------
Comprehensive loss $ (4,086) $ (8,969)
=========== ===========
NOTE 3 - UNUSUAL CHARGES
In 1998 the Company initiated a profit improvement program. Costs for the three
months ended March 31, 1999 totaled $3 million and consisted of $2.3 million of
employee severance and the balance for consulting fees.
NOTE 4 - SEGMENT DISCLOSURE
Operating information for the Company's reportable segments for the three-month
periods ended March 31, 2000 and 1999 can be found in the table on page 7 of
this Report. At March 31, 2000, there were no changes in the basis of
segmentation or in the measurement of segment operating results. Identifiable
assets of the Company's Technologies business were $30.5 million at March 31,
2000, compared with $45.4 million at December 31, 1999. The decrease was due to
the recovery of a $15.2 million trust fund that had previously secured the
estimated closure and post-closure costs at the Company's landfill site in
Idaho. There were no significant changes in identifiable assets in the Company's
other reportable segments between December 31, 1999 and March 31, 2000.
5
<PAGE>
ENVIROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company and its competitors and customers are subject to a complex, evolving
array of federal, state and local environmental laws and regulations. Such
requirements may not only affect the demand for treatment and disposal services,
but could also require the Company to incur significant costs for remediation or
other corrective action, facility closure and post-closure maintenance and
monitoring. It is possible that the future imposition of additional
environmental compliance requirements could have a material effect on the
Company's results of operations or financial condition, but the Company is
unable to predict any such future requirements. The Company believes that the
accompanying condensed consolidated financial statements appropriately reflect
all presently known compliance costs in accordance with generally accepted
accounting principles.
The Company is a party to litigation and proceedings arising in the normal
course of its present or former businesses. The Company has recorded a
contingent liability for certain product liability claims related to two of its
former businesses. In the opinion of management, based on currently available
information, the outcome of such matters will not have a material adverse effect
on the Company's financial condition or results of operations.
The Company provides assurances that it will be financially able to meet its
obligations related to the closure and post-closure monitoring and maintenance
procedures of its hazardous waste landfills. For the Company's landfill site in
Idaho, such assurances had previously been provided with cash deposits held in
trust. With the approval of various regulatory agencies, this trust fund was
replaced in the first quarter of 2000 by a surety bond with an insurance
company, and the $15.2 million balance of the trust fund was recovered by the
Company. As part of the surety bond agreement with the insurance company, the
Company has committed to making collateral payments as security for such surety
bond into a trust account. These payments total $5 million, 50% of which was
paid in the second quarter of 2000; the balance will be paid one year later.
At March 31, 2000, the Company is committed to spend approximately $25 million
for additions to capital equipment. This commitment may be partly funded by
leases the Company has not currently obtained, and portions of the commitment
may be spent after December 31, 2000. The Company also has commitments totaling
$5.7 million against its revolving credit facility for outstanding standby
letters of credit.
6
<PAGE>
ENVIROSOURCE, INC.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
--------------
RESULTS OF OPERATIONS
Three Months Ended 2000
March 31, Increase (decrease)
------------------------ ------------------------
2000 1999 Amount %
----------- ----------- ----------- -----------
(Dollars in thousands)
REVENUES
IMS $ 42,032 $ 42,101 $ (69) (0.2%)
Technologies 8,451 6,182 2,269 36.7%
----------- ----------- -----------
$ 50,483 $ 48,283 $ 2,200 4.6%
=========== =========== ===========
GROSS PROFIT (LOSS)
IMS $ 7,745 $ 8,144 $ (399) (4.9%)
Technologies 575 (97) 672
----------- ----------- -----------
$ 8,320 $ 8,047 $ 273 3.4%
=========== =========== ===========
OPERATING INCOME (LOSS)
IMS $ 4,197 $ 3,855 $ 342 8.9%
Technologies (461) (1,595) 1,134
Corporate headquarters (410) (467) 57 (12.2%)
----------- ----------- -----------
3,326 1,793 1,533 85.5%
Unusual charges - (2,964) 2,964
----------- ----------- -----------
$ 3,326 $ (1,171) $ 4,497
=========== =========== ===========
Consolidated revenue in the first quarter of 2000 increased 4.6%
compared with the same quarter of 1999. The increase reflected higher production
volume by the Company's steel industry customers that benefited both of the
Company's businesses. The Technologies revenue increase was due to higher
overall volumes of processed hazardous waste products, and a favorable change in
the mix of material processed. Revenue of the IMS business for the 2000 first
quarter was essentially unchanged from a year ago. Higher steel production
levels resulted in additional IMS revenues that effectively offset the loss of
two large contracts that were not renewed at the end of 1999.
Consolidated gross profit for the first quarter of 2000 increased 3.4%,
primarily due to the revenue increase.
Selling, general and administrative expenses for the 2000 first quarter
decreased 24% from the same quarter of 1999. Both operating segments benefited
from reduced administrative costs resulting in part from the Company's profit
improvement program, which originated in 1998. As part of this program, the
Company had incurred unusual charges during the 1999 first quarter of $3
million, consisting of $2.3 million for employee severance costs, and the
balance for consulting fees.
7
<PAGE>
ENVIROSOURCE, INC.
RESULTS OF OPERATIONS (CONTINUED)
Interest expense for the 2000 first quarter decreased 5.8%, as average
outstanding borrowings on the Company's bank credit facility were reduced
significantly from a year ago. During the current first quarter, the Company
repaid the entire $6 million of borrowings that had been outstanding on its bank
credit facility at December 31, 1999. Management expects to utilize some of its
available credit to invest in capital equipment and other pre-operating costs
for a significant new contract that is expected to begin full operations in
early 2001 (see below). Therefore, the Company may not experience the same
interest cost savings throughout the balance of this year.
Due to the factors described above, the Company recorded a 2000 first
quarter net loss of $4.1 million, an improvement compared with the first quarter
1999 net loss of $9.1 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise primarily from the funding
of capital expenditures, working capital needs and debt service obligations. At
March 31, 2000, the Company had negative working capital totaling $2.2 million,
a decrease of $6.2 million from December 31, 1999. The decrease was primarily
due to the recovery of cash totaling $15.2 million from a trust fund, the
proceeds of which were used to fund, among other things, capital expenditures.
The trust fund had previously provided financial assurance for the estimated
closure and post-closure costs at the Technologies landfill site in Idaho. In
conjunction with the trust fund recovery, the Company has committed to pay $5
million to a trust account as collateral for a surety bond issued by an
insurance company that replaced the trust fund in providing such financial
assurance. Half of this amount was paid in the second quarter of 2000, and the
balance will be paid one year later.
Other investing activities in the 2000 first quarter included $8.1
million of capital expenditures, compared with $5.4 million for the first
quarter of 1999. The increase was due to the investment required by a
significant new contract to provide services at a greenfield steel mill unit of
an established customer. The Company expects 2000 capital expenditures to exceed
the 1999 level of $17.3 million, primarily because of the new contract discussed
above. Through March 31, 2000, the Company is committed to equipment additions
totaling approximately $25 million. This commitment may be partly funded by
leases the Company has not currently obtained, and portions of this commitment
may be spent in years beyond 2000.
FORWARD-LOOKING STATEMENTS (SAFE HARBOR STATEMENT)
- --------------------------------------------------
Some of the statements in this Report are forward-looking statements.
These statements are based on current expectations that involve a number of
risks and uncertainties, which could cause actual results to differ materially
from those projected. These forward-looking statements should be read in
conjunction with the Company's 1999 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission, which includes information describing
factors that could cause actual results to differ materially from those
projected in such forward-looking statements.
8
<PAGE>
ENVIROSOURCE, INC.
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
--------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Appendix A (pages A-1 to A-3) to
the Company's Proxy Statement filed April 29, 1996, in respect of its
1996 Annual Meeting of Stockholders (File No. 1-1363)).
3.2 Amendment of Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Page 2 to the Company's Proxy
Statement filed April 30, 1997, in respect of its 1997 Annual Meeting
of Stockholders (File No. 1-1363)).
3.3 Amendment of Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Pages 13 and 14 of the Company's
Proxy Statement filed April 30, 1998, in respect of its 1998 Annual
Meeting of Stockholders (File No. 1-1363)).
3.4 By-Laws of the Company (incorporated herein by reference to Exhibit C
(pages C-1 to C-9) to the Company's Proxy Statement filed April 24,
1987, in respect of its 1987 Annual Meeting of Stockholders (File No.
1-1363)).
3.5 Amendment to the By-Laws of the Company (incorporated herein by
reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987 (File No. 1-1363)).
3.6 By-Laws Amendment Adopted March 26, 1997 By Unanimous Written Consent
of the Board of Directors, Effective June 19, 1997 (incorporated by
reference to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1997 (File No. 1- 1363)).
4.1 Indenture, dated as of July 1, 1993, between the Company and United
States Trust Company of New York, as Trustee, relating to the Company's
9-3/4% Senior Notes due 2003, including the form of such Notes attached
as Exhibit A thereto (incorporated herein by reference to Exhibit 4.10
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1993 (File No. 1-1363)).
4.2 First Supplemental Indenture, dated as of November 2, 1995, between the
Company and United States Trust Company of New York, as Trustee,
relating to the Company's 9-3/4% Senior Notes due 2003 (incorporated
herein by reference to Exhibit 4.15 to the Company's Quarterly Report
9
<PAGE>
ENVIROSOURCE, INC.
on Form 10-Q for the fiscal quarter ended September 30, 1995 (File No.
1-1363)).
4.3 Second Supplemental Indenture, dated as of September 24, 1997, between
the Company and United States Trust Company of New York, as Trustee,
relating to the Company's 9-3/4% Senior Notes due 2003 (incorporated
herein by reference to Exhibit 4.5 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1997 (File No.
1-1363)).
4.4 Indenture, dated as of September 30, 1997, between the Company and
United States Trust Company of New York, as Trustee, relating to the
Company's 9-3/4% Senior Notes due 2003, Series B, including the form of
such Notes attached as Exhibit A thereto (incorporated herein by
reference to Exhibit 4.6 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1997 (File No. 1-1363)).
4.5 Registration Rights Agreement, dated as of September 30, 1997, among
the Company and Morgan Stanley Dean Witter, Jeffries & Company, Inc.
and NationsBanc Capital Markets, Inc. (incorporated herein by reference
to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997 (File No. 1-1363)).
4.6 Registration Rights Agreement, dated as of May 13, 1993, among the
Company, FS Equity Partners II, L.P., The IBM Retirement Plan Trust
Fund and Enso Partners, L.P. (incorporated herein by reference to
Exhibit 4.29 to Amendment No. 1 to the Company's Registration Statement
on Form S-1, filed June 14, 1993 (File No. 33-62050)).
4.7 Loan Agreement, dated as of June 1, 1994, between the Industrial
Development Corporation of Owyhee County, Idaho and Envirosafe Services
of Idaho, Inc. relating to $8,500,000 Industrial Revenue Bonds, Series
1994. (The Company agrees to furnish a copy of such agreement to the
Commission upon request).
4.8 Loan and Security Agreement, dated as of November 16, 1999, the lenders
parties thereto, Bank of America, N.A., as Agent, International Mill
Service, Inc. and IMS Alabama, Inc. (incorporated herein by reference
to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (File No. 1-1363)).
10.1 Restated Incentive Stock Option Plan of the Company, as amended
(incorporated herein by reference to Exhibit A to the Company's
Registration Statement on Form S-8, filed January 17, 1989 (File No.
33-26633)).
10.2 Stock Option Agreement, dated March 18, 1992, between the Company and
Raymond P. Caldiero (incorporated herein by reference to Exhibit 10.20
10
<PAGE>
ENVIROSOURCE, INC.
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-1363)).
10.3 Stock Option Agreement, dated March 18, 1992, between the Company and
Jeffrey G. Miller (incorporated herein by reference to Exhibit 10.21 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-1363)).
10.4 Amendment, dated August 5, 1993, to the Stock Option Agreement, dated
March 18, 1992, between the Company and Jeffrey G. Miller (incorporated
herein by reference to Exhibit 10.22 to Post-Effective Amendment No. 1
to the Company's Registration Statement on Form S-1, filed September
16, 1993 (File No. 33-46930)).
10.5 Stock Option Agreement, dated August 5, 1993, between the Company and
Wallace B. Askins (incorporated herein by reference to Exhibit 10.23 to
Post-Effective Amendment No. 1 to the Company's Registration Statement
on Form S-1, filed September 16, 1993 (File No. 33-46930)).
10.6 Envirosource, Inc. 1993 Stock Option Plan (incorporated herein by
reference to Exhibit 10.21 to Amendment No. 1 to the Company's
Registration Statement on Form S-1, filed June 14, 1993 (File No.
33-62050)).
10.7 Envirosource, Inc. Stock Option Plan for Non-Affiliated Directors,
dated as of January 1, 1995 (incorporated herein by reference to
Exhibit 10.14 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (File No. 1-1363)).
10.8 Supplemental Executive Retirement Plan of the Company, effective
January 1, 1995 (incorporated herein by reference to Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-1363)).
10.9 Envirosource, Inc. 1999 Stock Option Plan (incorporated herein by
reference to Appendix A to the Company's Proxy Statement filed April
30, 1999, in respect of its 1999 Annual Meeting of Stockholders (File
No. 1-1363)).
10.10 Employment Agreement, dated as of January 20, 1999, between the Company
and John T. DiLacqua (incorporated herein by reference to Exhibit 10.19
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1999 (File No. 1-1363)).
10.11 Letter Agreement, dated February 15, 1999, between the Company and John
C. Heenan (incorporated herein by reference to Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999 (File No. 1-1363)).
11
<PAGE>
ENVIROSOURCE, INC.
10.12 Letter Agreement, dated March 23, 1999, between the Company and James
C. Hull (incorporated herein by reference to Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999 (File No. 1-1363)).
10.13 Letter Agreement, dated July 30, 1999, between the Company and James C.
Hull. (incorporated herein by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (File No. 1-1363)).
10.14 Employment Agreement, dated as of January 3, 2000, between the Company
and John P. Carroll (incorporated herein by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 1-1363)).
10.15 Employment Agreement, dated as of January 3, 2000, between the Company
and John C. Heenan (incorporated herein by reference to Exhibit 10.15
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 1-1363)).
10.16 Employment Agreement, dated as of January 3, 2000, between the Company
and Leon Z. Heller (incorporated herein by reference to Exhibit 10.16
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 1-1363)).
10.17* Promissory Note of John P. Carroll, dated August 1, 1995, as amended,
payable to International Mill Service, Inc.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed during the quarter ended March
31, 2000.
* Filed herewith.
12
<PAGE>
ENVIROSOURCE, INC.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: May 9, 2000
ENVIROSOURCE, INC.
By: /s/John C. Heenan
------------------
John C. Heenan
Senior Vice President and Chief Financial
Officer
13
<PAGE>
ENVIROSOURCE, INC.
EXHIBIT INDEX
Number Description Page
10.17 Promissory Note of John P. Carroll, dated EXHIBIT 1
dated August 1, 1995, as amended,payable to
International Mill Service, Inc.
14
$75,000.00 August 1, 1995
PROMISSORY NOTE
---------------
FOR VALUE RECEIVED, the undersigned, JOHN P. CARROLL (hereinafter
referred to as "Maker"), hereby promises to pay in immediately available funds,
in U.S. Dollars, to the order of INTERNATIONAL MILL SERVICE, INC., a
Pennsylvania corporation with its principal office at 1155 Business Center
Drive, Horsham, Pennsylvania 19044 ("Holder"), or to its assigns, the principal
amount of U.S. SEVENTY-FIVE THOUSAND DOLLARS (U.S. $75,000.00) (the"Loan") on
August 1, 2000. As this is a relocation note as described in Internal Revenue
Service Reg. Sec. 1.7872-5T(c)(1)(i), the Loan bears no interest.
On August 1 of each of the years 1996, 1997, 1998, 1999 and 2000,
Holder will forgive $15,000 of the Loan, provided that on each such date: (i)
Maker shall still be employed by Holder or one of its affiliates; and (ii) Maker
shall pay Holder an amount equal to $15,000 multiplied by the sum of the
employee's rate for FICA taxes (currently 7.65%) and the federal withholding tax
rate on extraordinary payments (currently 28%) (which amount shall be applied by
Holder to increase Maker's withholding account for federal income tax purposes).
All payments hereunder shall be made to Holder at Holder's principal
office address. Maker hereby authorizes Holder to offset the payment of
principal hereunder against any compensation payable by Holder to Maker. In the
event Maker's employment with Holder terminates for any reason, all principal
sums hereunder shall become immediately due and payable; provided however, that
in the event Maker's employment with Holder is terminated by Holder without
cause, all principal sums hereunder then outstanding shall be forgiven. Nothing
herein is intended to create an employment agreement or to restrict Holder's
right to terminate the employment of Maker at any time.
Maker hereby certifies to Holder that Maker reasonably expects to be
entitled to and will itemize deductions for each year the Loan is outstanding.
Maker's obligations hereunder shall be secured by a mortgage on Maker's
residence in Horsham, Pennsylvania, which residence is being acquired with the
proceeds of the Loan.
Failure of Holder to execute any right hereunder shall not constitute a
waiver of Holder's right to the later exercise thereof. Maker hereby waives any
and all demands, presentments for payment, protest, notice of dishonor or
nonpayment. Maker agrees to pay all reasonable costs and expenses incurred by
Holder in connection with any default action taken hereunder, including
reasonable attorney's fees and court costs.
Holder may, on notice to Maker, convey its interest in this note and
the security arrangements related thereto to any entity in which Holder has an
equity interest, in which case reference herein to "Holder" shall be deemed to
refer to such entity. The benefits of this arrangement are not transferable by
Maker.
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the
first date set forth above.
/s/ John P. Carroll
-------------------
JOHN P. CARROLL
Acknowledged and Agreed:
INTERNATIONAL MILL SERVICE, INC.
By: /s/ William L. Maloney
----------------------
Senior Vice President
Finance and Administration
2
<PAGE>
October 9, 1998
To: John Carroll
From: Bradley W. Harris /s/ Bradley W. Harris
Compensation expense totaling $15,000 has been recorded for you in 1998 as a
result of relocation loan forgiveness. In addition we will make tax deposits on
your behalf totaling $4,988 (which will be reported as taxes withheld on your
Form W-2) in accordance with the attached schedule. The tax deposits will be
recorded as additions to your outstanding loan balance consistent with prior
years. If 1998 bonuses are paid in early 1999, in addition to routine tax
withholding on the bonus payment, your bonus payment will be reduced by the
amount of tax deposits made on your behalf and your loan balance reduced
accordingly. If 1998 bonuses are not paid, the tax deposit made on your behalf
will remain in your loan balance and will be forgiven in a year subsequent to
the initial loan term (loan forgiveness will continue at a rate of $15,000 a
year). If your employment with the company terminates, any unpaid loan balance
(including unfogiven tax deposits) will be due at that time.
Please sign a copy of this memo evidencing your understanding and acceptance of
these terms and return a copy to me. The terms as outlined above are consistent
with those of the prior year.
/s/ John P. Carroll
10/12/98
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the condensed consolidated balance sheet of Envirosource,
Inc. at March 31, 2000, and from the consolidated statement of
operations of Envirosource, Inc. for the three months ended
March 31, 2000, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,700
<SECURITIES> 0
<RECEIVABLES> 33,193
<ALLOWANCES> 838
<INVENTORY> 0
<CURRENT-ASSETS> 39,704
<PP&E> 261,750
<DEPRECIATION> 156,575
<TOTAL-ASSETS> 264,367
<CURRENT-LIABILITIES> 41,911
<BONDS> 278,659
0
0
<COMMON> 291
<OTHER-SE> (89,850)
<TOTAL-LIABILITY-AND-EQUITY> 264,367
<SALES> 0
<TOTAL-REVENUES> 50,483
<CGS> 0
<TOTAL-COSTS> 36,564
<OTHER-EXPENSES> 7,075
<LOSS-PROVISION> 35
<INTEREST-EXPENSE> 7,358
<INCOME-PRETAX> (3,826)
<INCOME-TAX> 243
<INCOME-CONTINUING> (4,069)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,069)
<EPS-BASIC> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
