THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF
REGULATION S-T
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended: June 30, 1996
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 No. 0-19009
AMETECH, Inc.
_____________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Oklahoma 73-0766924
_______________________ __________________________________
(State of Incorporation) (I.R.S. Employer Identification No.)
1813 Southeast 25th
Oklahoma City, Oklahoma 73129
________________________ ________
(Address of Principal (Zip Code)
Executive Offices)
Registrant's Telephone Number, Including Area Code:
(405) 677-8781
______________
Indicate by check mark whether the Registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for the shorter
period of that the Registrant has had to file the reports), and (2)
has been subject to the filing requirements for the past 90 days.
YES X NO
____ _____
As of August 8, 1996, the Registrant had 13,798,858 shares of
common stock issued and outstanding (excluding 115,000 shares of
common stock held as treasury stock).
<PAGE>
FORM 10-Q OF AMETECH, INC.
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements.................... 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................... 10
PART II
Item 1. Legal Proceedings....................... 15
Item 4. Submission of Matters to a Vote of
Security Holders................... 15
Item 6. Exhibits and Reports on Form 8-K........ 16
SIGNATURES ........................................ 17
<PAGE>
PART I
FINANCIAL INFORMATION
The accompanying Consolidated Balance Sheet as of June 30, 1996 and
the related Statements of Operations and Retained Earnings and
Statements of Cash Flows for the three and six month periods ended
June 30, 1996 and 1995 are unaudited. In the opinion of
management, all adjustments have been included. Such adjustments
consisted of normal, recurring items. Interim results are not
necessarily indicative of results for a full year. The Financial
Statements and notes are presented as permitted by Form 10-Q and do
not contain certain information included in the Company s annual
financial statements and notes; therefore, these financial
statements should be read in conjunction with the notes to the
financial statements contained in the Company s Annual Report on
Form 10-K for the year ended December 31, 1995 which are
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
____________ ___________
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,000 $ 74,000
Accounts receivable 4,659,000 3,538,000
Prepaid expenses 1,111,000 429,000
Other 705,000 646,000
___________ ___________
Total Current Assets 6,485,000 4,687,000
___________ ___________
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
of $9,592,000 and $9,742,000 at
June 30, 1996, and December 31,
1995, respectively:
Transportation equipment 8,814,000 9,479,000
Buildings and other 1,993,000 2,061,000
___________ ___________
10,807,000 11,540,000
___________ ___________
OTHER ASSETS, net of accumulated
amortization of $345,000 and
$325,000 at June 30, 1996,
and December 31, 1995,
respectively 433,000 499,000
___________ ___________
$17,725,000 $16,726,000
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
June 30, December 31,
1996 1995
____________ ___________
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,304,000 $ 2,053,000
Current maturities of long-term obligations 2,571,000 2,126,000
___________ ___________
Total Current Liabilities 4,875,000 4,179,000
___________ ___________
DEFERRED INCOME TAXES 1,386,000 1,365,000
___________ ___________
LONG-TERM OBLIGATIONS, net of current
maturities 6,886,000 6,242,000
___________ ___________
STOCKHOLDERS' EQUITY:
Common stock of $.01 par value;
25,000,000 shares authorized at
June 30, 1996, and December 31,
1995;
13,900,032 and 13,874,206 shares
issued at June 30, 1996, and
December 31, 1995, respectively 139,000 139,000
Additional paid-in capital 2,991,000 2,985,000
Retained earnings 1,557,000 1,925,000
___________ ___________
4,687,000 5,049,000
Less - Treasury Stock (115,000 shares at
June 30, 1996, and December 31,
1995), at cost 109,000 109,000
___________ ___________
Total Stockholders' Equity 4,578,000 4,940,000
___________ ___________
$17,725,000 $16,726,000
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
June 30,
___________________________
1996 1995
___________ ___________
<S> <C> <C>
REVENUES $ 5,078,000 $ 4,501,000
___________ ____________
COSTS AND EXPENSES:
Operating costs 3,907,000 3,185,000
General and administrative expense 507,000 599,000
Depreciation and amortization 479,000 443,000
Interest expense 231,000 165,000
Other expense (income), net 44,000 (4,000)
___________ ___________
5,168,000 4,388,000
___________ ___________
EARNINGS (LOSS) BEFORE INCOME TAXES (90,000) 113,000
___________ ___________
INCOME TAX EXPENSE (BENEFIT):
Current 15,000 22,000
Deferred (13,000) 25,000
___________ ___________
2,000 47,000
___________ ___________
NET EARNINGS (LOSS) (92,000) 66,000
RETAINED EARNINGS AT BEGINNING
OF PERIOD 1,649,000 2,291,000
___________ ___________
RETAINED EARNINGS AT END OF PERIOD $ 1,557,000 $ 2,357,000
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (Loss) per common share $ (0.01) $ 0.00
=========== ===========
Weighted average shares outstanding 13,790,669 13,731,119
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Six Months Ended
June 30,
___________________________
1996 1995
___________ ___________
<S> <C> <C>
REVENUES $ 9,388,000 $ 8,297,000
___________ ____________
COSTS AND EXPENSES:
Operating costs 7,445,000 5,899,000
General and administrative expense 1,116,000 1,138,000
Depreciation and amortization 974,000 875,000
Interest expense 444,000 299,000
Other expense (income), net (58,000) (33,000)
___________ ___________
9,921,000 8,178,000
___________ ___________
EARNINGS (LOSS) BEFORE INCOME TAXES (533,000) 119,000
___________ ___________
INCOME TAX EXPENSE (BENEFIT):
Current (186,000) (17,000)
Deferred 21,000 66,000
___________ ___________
(165,000) 49,000
___________ ___________
NET EARNINGS (LOSS) (368,000) 70,000
RETAINED EARNINGS AT BEGINNING
OF PERIOD 1,925,000 2,287,000
___________ ___________
RETAINED EARNINGS AT END OF PERIOD $ 1,557,000 $ 2,357,000
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (Loss) per common share $ (0.03) $ 0.01
=========== ===========
Weighted average shares outstanding 13,783,345 13,719,727
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
___________________________
1996 1995
___________ ___________
<S> <C> <C>
Cash Flows From Operating Activities:
Cash collected from customers $ 8,274,000 $ 8,102,000
Interest paid (444,000) (305,000)
Interest received 22,000 32,000
Cash paid to employees and other
suppliers of goods and services (8,933,000) (6,667,000)
Income taxes refunded (paid) 1,000 (92,000)
___________ ___________
Net Cash Provided (Used) by Operating
Activities (1,080,000) 1,070,000
___________ ___________
Cash Flows From Investing Activities:
Additions to property and equipment (289,000) (2,309,000)
Proceeds from disposal of equipment 153,000 93,000
Proceeds from sale of subsidiary 0 18,000
Payments received on notes receivable 57,000 112,000
___________ ___________
Net Cash Used in Investing Activities (79,000) (2,086,000)
___________ ___________
Cash Flows From Financing Activities:
Proceeds of long-term debt 1,836,000 1,937,000
Payments on long-term debt (747,000) (975,000)
Sale of unissued stock 6,000 10,000
___________ ___________
Net Cash Provided by Financing
Activities: 1,095,000 972,000
___________ ___________
Net Decrease in Cash and
Cash Equivalents (64,000) (44,000)
___________ ___________
Cash and Cash Equivalents at
Beginning of Period 74,000 45,000
___________ ___________
Cash and Cash Equivalents at
End of Period $ 10,000 $ 1,000
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. The financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions are eliminated.
2. EARNINGS PER SHARE
Earnings per common share are based upon the weighted average
number of common shares outstanding during the respective three
and six month periods. All outstanding stock options are
considered anti-dilutive and are not included in the calculation
for earnings per share.
3. RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
The reconciliation of net earnings (loss) to net cash provided
by operating activities for the six-month periods ended June 30,
1996 and 1995 is as follows:
Six Months Ended June 30,
__________________________
1996 1995
__________ __________
<S> <C> <C>
Net Earnings (Loss) $ (368,000) $ 70,000
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 974,000 875,000
Gain on sale of subsidiary (18,000) (35,000)
(Gain)loss on sale of property (93,000) 11,000
Change in assets and liabilities:
Increase in accounts receivable (1,114,000) (194,000)
Increase in prepaid expenses (682,000) (449,000)
Increase in other assets (59,000) (31,000)
Increase in accounts payable
and accrued liabilities 251,000 727,000
Deferred income taxes 21,000 66,000
Write-off of bad debts 0 25,000
Other 8,000 5,000
__________ _________
$(1,080,000) $1,070,000
========== =========
</TABLE>
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
4. CHANGE IN ACCOUNTING ESTIMATE
<TABLE>
<CAPTION>
Effective January 1, 1995, the Company elected to change the
estimated useful life for tractors from seven to ten years to
more closely approximate the useful life of such assets. The
effect of this change was to increase net income for the six
months ended June 30, 1995 by $128,000 ($.01 per share),
summarized as follows:
<S> <C>
Effect of life of tractors $217,000
Less: Tax effect of change 89,000
________
Increase in net income $128,000
========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
On January 3, 1992, seven individual plaintiffs filed a Petition
against the Company s transportation subsidiary, Environmental
Transportation Services, Inc. ( ETS ), and Dyna-Turn of Oklahoma
Incorporated ( Dyna-Turn ), in the District Court of Oklahoma
County. The seven plaintiffs, who were employees at a waste
incineration facility in Miami, Oklahoma, claim that Dyna-Turn
generated solid waste which was contaminated with toxic and
hazardous chemicals, and that this solid waste was transported
by ETS to the incineration facility for disposal. The
plaintiffs claim that Dyna-Turn and ETS were engaged in ultra-
hazardous activities during the generation and transportation of
the waste, and failed to warn the plaintiffs of the hazardous
nature of the waste or of its harmful side effects.
The plaintiffs claim they sustained personal injuries and lost
earnings and are seeking unspecified actual damages in excess of
$10,000 and punitive damages.
In March 1993, the Company learned that its insurance carrier
had denied coverage for the plaintiffs claims. The Company has
instructed its attorneys to vigorously defend the litigation.
The plaintiffs have not initiated further action, and as a
result, there are still facts unknown to the Company. The
Company believes that ETS has valid defenses to the plaintiffs
claims, but at this stage of litigation, the Company is unable
to determine the amount of its potential exposure to loss, if
any.
<PAGE>
The Company is in default under its cash flow covenant with the
equipment lender. By letter, dated August 16, 1996, the lender
has advised the Company that the Company and the lender are
currently negotiating a waiver to such default, and the lender
believes that the parties are close to an agreement and that the
lender will be able to issue the waiver shortly. As a result of
such letter, the Company continues to classify the long-term
portion due to such lender as long-term debt. If, for any
reason, a waiver is not issued by the lender, $1,837,000 now
classified as long-term debt would have to be reclassified
as current liabilities.
6. SUBSEQUENT EVENTS
In November, 1995, ETS was sued by an individual who alleged he
was hired as an employee and that ETS breached his written
employment agreement. During July, 1996, the court entered a
judgment against ETS in favor of the plaintiff. The court found
that ETS was liable to the plaintiff for payment of compensation
for the two years of the employment agreement, which the Company
estimates will be approximately $130,000, which includes any
prejudgment interest and attorneys' fees of the plaintiff's
counsel. The Company is in the process of attempting to
negotiate a reduction of the amount of the judgment and extended
terms of payment.
During August, 1996, the Company finalized the sale of one (1)
of the facilities owned by its transportation subsidiary located
in Laporte, Texas, and the sale by a subsidiary of its non-
hazardous waste processing facility located in Green Cove
Springs, Florida. The Company's subsidiaries sold these two (2)
facilities for approximately $1.2 million and realized net
proceeds (after payment of a certain mortgage and closing cost)
of approximately $650,000 as a result of such transactions.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995
The net loss for the quarter ended June 30, 1996 was $92,000, as
compared to net income of $66,000 for the quarter ended June 30,
1995. This decrease in net earnings of $158,000 was primarily
attributable to a decrease in the gross margin (revenues less
operating costs) of $145,000 along with higher interest costs of
$66,000.
Total revenues were $5,078,000 and $4,501,000 for the quarters ended
June 30, 1996 and 1995, respectively. This increase of $577,000 was
largely attributable to an increase in transportation and related
revenues of $982,000 due, in part, to revenues generated by the
Company's transportation subsidiary's California operation, which was
acquired effective July 1, 1995, and the Company's transportation
subsidiary's Colorado operation, the assets of which were acquired in
July 1995. Additionally, the Company s transportation subsidiary
generated increased miles during the second quarter of 1996 due to
operating additional transportation equipment. The increase in
volume resulting from the additional tractors was partially offset by
a decrease in the running mile rate of $.05 per mile which is due to
continuing competitive pressures. Other transportation related
revenues remained fairly constant from 1995 to 1996.
Non-transportation related revenues decreased $405,000 from the
second quarter of 1995 to the second quarter of 1996 due to decreased
revenues generated by the Company s non-hazardous waste processing
subsidiary located in Green Cove Springs, Florida, and to a decrease
in revenues recorded by the Company s remediation subsidiary which
started a remediation project in March 1995. The remediation
subsidiary is currently inactive.
Operating costs were $3,907,000 and $3,185,000 for the second
quarters of 1996 and 1995, respectively. This represents an increase
of 6.2 percentage points when expressed as a percentage of total
revenues.
Operating costs relating to transportation services were $3,872,000
and $2,806,000 for the quarters ended June 30, 1996 and 1995,
respectively. These amounts represent 77.4% and 69.8% of
transportation and related revenues for the respective quarters of
1996 and 1995. This increase in the percentage of operating costs to
revenues from 1995 to 1996 is due largely to the lower running mile
rate as discussed earlier and to increased variable transportation
costs.
Non-transportation operating costs decreased $339,000 from 1995 to
1996 due to reduced activity of the Company's non-hazardous waste
<PAGE>
processing subsidiary located in Florida, as discussed earlier as
well as to reduced operating costs associated with the Company's
remediation subsidiary which had started a remediation project in
March 1995.
General and administrative expenses decreased $92,000 from 1995 to
1996 due to lower personnel and travel and entertainment costs.
Interest expense increased $66,000 due to increased debt.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30,
1995
The net loss for the six months ended June 30, 1996 was $368,000, as
compared to net income of $70,000 for the six months ended June 30,
1995. This decrease in net income of $438,000 is primarily
attributable to a decrease in the gross margin of $455,000, as well
as increased interest costs of $145,000.
Total revenues for the first half of 1996 were $9,388,000, as
compared to $8,297,000 for the first half of 1995, an increase of
$1,091,000. This increase was due to an increase in transportation
and related revenues of $1,682,000 due, in part, to revenues
generated by the Company's transportation subsidiary's California
operation, which was acquired effective July 1, 1995, and the Company's
transportation subsidiary's Colorado operation, the assets of which
were acquired in July, 1995. Additionally, the Company's transportation
subsidiary generated increased miles during the first six months of 1996
due to operating additional transportation equipment. The increase in
volume resulting from the additional equipment was partially offset by
a decrease in the running mile rate of $.05 per mile due to continuing
competitive pressures. Other transportation related revenues decreased
$120,000 due to reduced demurrage revenues.
Non-transportation related revenues decreased $584,000 from 1995 to
1996 due to decreased revenues generated by the Company's non-
hazardous waste transfer facility located in Florida and to a
decrease in revenues recorded by the Company s remediation subsidiary
which started a remediation project in March 1995. This remediation
subsidiary is currently inactive.
Total operating costs were $7,445,000 and $5,899,000 for the six
month periods ended June 30, 1996 and 1995, respectively. These
amounts represent 79.3% and 71.1% of total revenues for the
respective six month periods of 1996 and 1995, an increase of 8.2
percentage points.
Operating costs related to transportation services were $7,382,000
and $5,355,000 (79.7% and 70.7% of transportation and related
revenues) for the six month periods ended June 30, 1996 and 1995,
<PAGE>
respectively. The increase in the percentage of operating costs to
revenues from 1995 to 1996 is attributable to the lower running mile
rate as discussed earlier and to increased variable transportation
costs.
Operating costs not related to transportation services decreased
$473,000 from 1995 to 1996 due to the reduced activity at the
Company's subsidiary's non-hazardous waste transfer facility located
in Florida discussed earlier and to reduced operating costs
associated with the Company s remediation subsidiary which had
started a remediation project in March 1995.
General and administrative expenses decreased $22,000 from 1995 to
1996 due largely to reduced personnel and travel and entertainment
expenses. These reductions in expenses were partially offset by
increased general and administrative expenses associated with the
Company's transportation subsidiary's California operation.
Depreciation expense increased $99,000 due largely to the Company's
transportation subsidiary's California operation's depreciation
expense and to depreciation associated with the assets purchased
relating to the Company's transportation subsidiary's Colorado
operation.
Interest expense increased $145,000 from 1995 to 1996 due to
increased debt.
Liquidity and Capital Resources
Working capital increased from $508,000 at December 31, 1995 to
$1,610,000 at June 30, 1996. This increase has resulted from the use
of long-term debt to fund operations.
In February 1996, the Company entered into a new revolving working
capital line of credit agreement (the Agreement ) with a new lender
which provides for a $3,000,000 line of credit for working capital
purposes. This line of credit 1) is collateralized by accounts
receivable, deposit accounts and certain intangible assets, 2) bears
interest at the prime rate published by The Chase Manhattan Bank,
N.A. plus 1.875%, and 3) provides for advances at 80% of eligible
receivables. The note is due February 6, 1998 and there are no
financial covenants associated with the Agreement. The interest on
the note is payable monthly and principal payments are made as
accounts receivable are collected. At June 30, 1996 the Company had
borrowed $2,955,000 under the new credit Agreement, and at
December 31, 1995, the Company had borrowed $1,549,000 under the
former credit agreement. In June 1996, the Company and the new lender
entered into a short term agreement ( Short Term Agreement ) whereby
the Company was allowed to borrow up to $3,300,000, regardless of
eligible receivables. Pursuant to the Short Term Agreement, the line
of credit will be reduced to $3,000,000 on August 19, 1996 at which
time the Company must pay the lender the amount required to reduce
<PAGE>
the loan balance so that it neither exceeds $3,000,000 nor is more
than 80% of eligible receivables. At August 16, 1996, the Company
had $3,013,000 borrowed under the Agreement, resulting in an
overdraft of $531,000. The Company intends to use the proceeds from
the sale of two real estate properties discussed below and in Note 6
to the Notes to Consolidated Financial Statements to reduce the
credit line to the level required by the Short Term Agreement.
In the first quarter of 1996, the Company paid only the interest
portion of the February and March loan payments to its principal
equipment lender due to a temporary cash flow shortage. The lender
and the Company have entered into an agreement whereby the Company
must pay the February and March principal payments in September and
October 1996. Additionally, this lender increased the interest rate
by one percentage point for the remaining term of such loans by the
lender. As of June 30, 1996, the principal amount owing to this
equipment lender was approximately $3.8 million. Additionally, this
lender has, in the past, allowed the Company to use proceeds from the
sale of equipment (on which this lender has had liens) for working
capital purposes. The Company and the lender have entered into a
letter agreement whereby the Company has agreed to pay to the lender
$105,500 by September 30, 1996 and $105,500 by December 31, 1996. At
June 30, 1996, the Company was in default of the cash flow covenant
contained in the agreement with the equipment lender. The equipment
lender has written the Company a letter dated August 16, 1996, that
the lender and the Company are currently negotiating the waiver of
such default, and that the lender believes that the parties are close
to an agreement as to the waiver and that the lender will be able to
issue the waiver shortly. The lender has not accelerated the unpaid
amount due to such lender as a result of such default, and, as a
result of such letter, the Company does not believe such default will
have a material adverse effect on the liquidity of the Company.
During July, 1996, a court rendered a judgment against the Company's
transportation subsidiary finding that the transportation subsidiary
breached an employment agreement with an employee. Under the judgment,
the transportation subsidiary's liability is estimated to be approximately
$130,000, including pre-judgment interest and the plaintiff's attorney's
fees. The Company is presently attempting to negotiate a reduction of
the amount of the judgment and extended terms of payment. The Company
believes that it can pay such judgment from its cash flow and lines of
credit.
In February 1996, Carl Anderson, Jr., CEO and acting President,
loaned the Company $195,000 bearing interest at 10% per annum. A
definite repayment plan has not been negotiated except that interest
is payable monthly. The loan was for working capital purposes and is
unsecured. The outstanding balance on this loan at June 30, 1996 was
$183,000.
The Company's transportation subsidiary has entered into two lease
agreements with Sullivan s Trucking Company, Inc. ( Sullivan ),
<PAGE>
effective March 1, 1996, whereby ETS is leasing a certain number of
hazardous waste tractors, trailers and roll-off boxes. ETS has used
this equipment to transport waste for Sullivan s and ETS customers.
In connection with such leases, ETS is to pay Sullivan $8,684 per
month for twenty four months on one lease and $28,803 per month for
forty eight months on the other lease. ETS began making payments on
both these leases March 1, 1996.
The Company has reached an agreement in principal to acquire from
Sullivan certain customer lists, goodwill, inventory, and other
business aspects of Sullivan s hazardous waste transportation
business. Upon closing of this transaction, the Company will pay
Sullivan 1,309,221 shares of the Company s common stock and will
lease from Sullivan its transportation terminal in Ponca City,
Oklahoma for a term of four years at a rental of $3,800 per month.
The Company's accounts payable continue to age beyond normal terms.
In order to generate additional liquidity, during August, 1996, the
Company sold one (1) of the facilities owned by its transportation
subsidiary and a facility owned by another subsidiary to process
non-hazardous waste located in Florida. The Company realized net
proceeds (after the payment of a certain mortgage and closing costs)
from these transactions of approximately $650,000. In addition, the
Company anticipates receiving approximately $275,000 as a tax refund
during the third quarter of 1996. With its present working capital
line of credit and the net proceeds resulting from the sale of certain
assets, together with the collection of its receivables and expected
income tax refund, the Company believes that it will be able to meet
its presently foreseeable working capital requirements and its
requirements under its various credit facilities; however, the
Company anticipates its payables in excess of 90 days will continue
at the above-described level or slightly increase during the
remainder of 1996. This is a forward-looking statement and involves
a number of uncertainties that could cause actual results regarding
the Company s ability to meet is presently foreseeable working
capital and other requirements to differ materially, including but
not limited to, the Company not being able to return to profitability
in 1996, or its revenues materially decreasing from that anticipated
in 1996, the Company s inability to generate sufficient eligible
receivables in order to fully utilize its present working capital
line of credit, a material amount of receivables are not collected
when anticipated, and/or the Company does not receive the tax refund
as expected.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no additional material legal proceedings pending against
the Company and/or its subsidiaries not previously reported by the
Company in Item 3 of its Form 10-K for the fiscal year ended
December 31, 1995, which Item 3 is incorporated herein by reference,
except as discussed below.
On November 22, 1995, the Company's transportation subsidiary,
Environmental Transportation Services, Inc. ("ETS"), was sued by
Richard K. Larson for breach of an alleged employment contract.
The case was and is pending in the United States District Court,
Northern District of Texas, Fort Worth Division, and is styled
Richard K. Larson v. Environmental Transportation Services, Inc.
In July, 1996, the court rendered a judgment in this matter for
the plaintiff against ETS. The Company anticipates that the
judgment will be approximately $130,000 with pre-judgment interest
and plaintiff's attorneys' fees. See Note 6 to Notes to
Consolidated Financial Statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's 1996 Annual Meeting of Shareholders held on July 18,
1996, the following four (4) members of the Board of Directors were
reelected for a term of three (3) years, as follows:
Number of Number of
Shares to Abstentions
Number of Withhold and Broker
Name Shares "FOR" "Authority" "Non-Votes"
_____________________ ____________ ___________ ___________
Carl B. Anderson, Jr. 12,541,084 118,825 -
James E. Brown 12,552,009 107,900 -
Jay T. Edwards 12,558,009 101,900 -
Allen G. Poppino 12,558,409 101,500 -
At the Annual Meeting, Grant Thornton, certified public accountants,
was appointed as independent auditor of the Company for 1996, as
follows:
Number of Number of
Shares to Abstentions
Number of "Withhold and Broker
Shares "FOR" Authority" Non-Votes
___________ _________ __________
12,573,984 4,825 81,000
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Letter from Associates TransCapital Services
("Associates") to Environmental Transportation
Services, Inc., dated June 6, 1996
4.2 Assignment of Contracts between Associates and
the Company
4.3 Fifth Affirmation, Extension and Amendment of
Guaranty from the Company to CIT Group/Equipment
Financing, Inc.
4.4 First Amendment to Promissory Note to CIT
Group/Equipment Financing
4.5 Letter from CIT Group to the Company, dated
August 16, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K - The Company did not file any
reports on Form 8-K during the quarter ended June 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company has caused
the undersigned, duly authorized, to sign this report on its behalf
on the 19th day of August, 1996.
AMETECH, Inc.
By /s/ Carl B. Anderson, Jr.
______________________________
Carl B. Anderson, Jr.
Chief Executive Officer
By /s/ Kerry Willingham
______________________________
Kerry Willingham
Controller
(Principal Financial Officer)
ISTE:\A-C\AMETECH\10Q\696\10Q.1
________________________________________________
Associates TransCapital Services
A division of Associates Commercial Corporation
________________________________________________
Working capital solutions for the trucking industry
in conjunction with Heller Financial, Inc.
June 6, 1996
Mr. Carl B. Anderson, Jr.
Environmental Transportation Services, Inc.
1813 Southeast 25th
Oklahoma City, Oklahoma 73129
RE: Transportation Accounts Financing and Security Agreement dated
as of February 6, 1996 (the "Agreement")
Dear Mr. Anderson:
This letter is to confirm our agreement to grant your request for
a temporary increase in the Maximum Advance, as that term is
defined in Article II Section 2.01 of the Agreement. Subject to
the terms and conditions of this letter and our receipt of the
following additional documents:
* Continuing Guaranty of Carl B. Anderson, in the form enclosed
herewith
* Continuing Guaranty of BMH Materials, Inc., in the form
enclosed herewith
* Continuing Guaranty, Rider A and Promissory Note
Pledge/Security Agreement by Ametech, Inc.
We will agree to increase the Maximum Advance from $3,000,000.00 to
$3,300,000.00 for the period from June 6, 1996 until the
"Termination Date" as hereinafter defined. On the Termination
Date, the Maximum Advance shall be reduced to $3,000,000.00, and
you shall immediately pay Associates without notice or demand, the
amount required to reduce the Receivable Loan Balance so that it
neither exceeds $3,000,000.00 nor is more than 80% of the Eligible
Assets.
The "Termination Date" is the earlier of (i) August 15, 1996 or
(ii) the Closing Date, as defined in the attached real estate
contracts, provided, however, that if such contracts shall close on
different dates, for purposes of subpart (ii) of this sentence, the
Closing Date shall be deemed to be the last of such Closing Dates
to occur.
300 East Carpenter Freeway, Irving, Texas 75062
Mailing Address: P. O. Box 650363, Dallas, TX 75265-0363
<PAGE>
Agreement Letter
June 6, 1996
Page 2
Furthermore, if as of the Closing Date of either of the two
attached real estate contracts, the Receivable Loan Balance shall
then exceed $3,000,000.00 or shall exceed 80% of the Eligible
Accounts, then you shall pay us an amount equal to the amount of
the funds received by the seller under such contract or if less,
the amount required to reduce the Receivable Loan Balance so that
it neither exceeds $3,000,000.00 nor is more than 80% of the
Eligible Accounts.
Finally, except as modified by this letter, the Agreement shall
continue in full force and effect. Please sign a copy of this
letter in the space provided below and return it to us to evidence
your agreement with the above terms.
Very truly yours,
Associates TransCapital Services
a division of Associates Commercial Corporation
By: /s/ K. Louen
_______________________
Title: Vice President
________________________
RIDER A
(Assignment of Contract)
For value received, the undersigned guarantor ("Guarantor"),
hereby pledges, assigns and grants to the below-named secured
party, its successors and assigns ("Secured Party") a security
interest in the following collateral (collectively called
"Collateral"): the attached Consulting Services and Competition
Agreement dated January 20, 1992, by and between Guarantor and
Academy Computing Corporation ("Academy") hereinafter the
"Agreement", all other related documents, instruments and general
intangibles, including all guaranties thereof, (collectively with
the Agreement called the "Documents"); all payments and other
amounts due or to become due under the Documents and all other cash
and non-cash proceeds thereof (collectively called "Revenues"); all
rights under and benefits of the terms, covenants and provisions of
the Documents; and all legal and other remedies available for
enforcement of the terms, covenants and provisions of the
Documents.
The Collateral shall secure the payment of all obligations and
indebtedness now or hereafter existing of Guarantor to Secured
Party including but not limited to the obligations under that
certain Continuing Guaranty dated February 6, 1996 (the "Guaranty")
executed by Guarantor for the benefit of Secured Party relating to
the obligations owed by Environmental Transportation Services, Inc.
("Company") to Secured Party.
Guarantor agrees to fully perform all its obligations under
the Agreement. Guarantor agrees that Secured Party does not, by
this Rider A or otherwise, assume any of the obligations of
Guarantor under the Agreement or other Documents. Guarantor
agrees, upon the request of Secured Party, from time to time (a) to
deliver to Secured Party any or all Documents, (b) to keep all
Documents, other than those delivered to Secured Party, in
fireproof cabinets at Guarantor's chief executive office or its
principal place of business, as Secured Party may direct, and not
to remove the same from such location, (c) to mark all Documents
and Debtor's books of account, ledger cards and other records
relating to the Collateral with a notation satisfactory to Secured
Party disclosing that they are subject to Secured Party's interest,
and (d) to execute and deliver to Secured Party any and all further
instruments and documents, including, without limitation, separate
assignments and financing statements, which Secured Party deems
necessary or desirable to obtain the full benefits of the
assignment, rights, interests and powers herein granted. Guarantor
hereby grants to Secured Party the right (in Guarantor's name or
otherwise, and without affecting Guarantor's obligations to Secured
Party): to demand, receive, compromise, extend the time of payment
of or give a discharge for, any and all Revenues; to endorse any
checks or other instruments or orders in connection with the
Revenues; and to file any claims or take such actions as institute
<PAGE>
such proceedings as Secured Party may deem necessary or advisable
to protect Secured Party's interests.
Guarantor shall have no authority to, and will not, without
Secured Party's prior written consent, accept collections due
under, or modify the terms or provisions of the Documents;
provided, however, until Secured Party notifies Guarantor to the
contrary, Guarantor may collect monies owing under the Documents as
the same becomes due but not otherwise. Guarantor agrees, upon the
request of Secured Party, (i) to notify Academy or any other person
obligated under the documents of the interest of Secured Party or
its assigns, and (ii) to direct Academy to pay all Revenues
directly to Secured Party. Guarantor further agrees to forward
promptly to Secured Party all notices received by Guarantor from
any of the obligors under the Documents.
Guarantor agrees and warrants that: all Documents are and
shall be genuine and enforceable; the Agreement contains the entire
agreement between Guarantor and Academy; if required by Secured
Party, Academy shall waive all rights to any defenses, set-offs and
counterclaims as against Secured Party; if required by Secured
Party, Academy shall acknowledge and agree that Secured Party has
no obligation to perform or fulfill any of Guarantor's obligations
under the Agreement; all names, addresses, signatures, amounts and
other statements and facts contained in the Documents are true and
correct; there is and will be no prepayments of Revenues owing
under the Agreement except as stated therein or as has been
approved in writing by Secured Party; there is and has been no
default under the Agreement; the Agreement and any guaranty thereof
conforms to all applicable laws and regulations, and are and will
be legally enforceable by Secured Party in the state(s) where
Secured Party, Academy and any guarantor of Academy are located;
Guarantor will comply with all of its warranties and other
obligations under the Agreement; the Collateral is and will be free
from all liens and encumbrances other than Secured Party's rights;
the Agreement and all guaranties are and will be free from all set-
offs, counterclaims and other defenses; Guarantor has caused or
will promptly cause such actions or procedures to be accomplished
as are permitted or required by statute or regulation to perfect
interests in the Collateral, including, without limitation, filing
financing statements and recording documents, and disclosing
Secured Party's interest; Guarantor has the authority to grant and
assign a security in the Collateral, including, without limitation,
filing financing statements and recording documents, and disclosing
Secured Party's interest; Guarantor has the authority to grant and
assign a security interest in the Collateral in favor of Secured
Party; and the copy of the Agreement which is attached hereto is a
true and correct copy of the original thereof, and all other copies
containing original signatures. Guarantor also agrees that, at the
same time it sends to any person any notice concerning (i) a
default by Academy or any other person obligated under the
<PAGE>
Documents, (ii) termination of the Agreement; or (iii) any other
matter which might affect the Academy's or any other person's
obligation to pay Revenues owing under any Document, Guarantor will
send a copy thereof to Secured Party at the same address to which
payments are being made hereunder or at such other address as
Secured Party may specify in writing.
Secured Party shall have the right at all reasonable times and
from time to time (i) to audit any and all of Guarantor's books and
records, (ii) to confirm and verify the amount owing to Guarantor
from the obligors under the Documents, (iii) to discuss the
affairs, finance and accounts of Guarantor with, and to be advised
as to the same by, its officers at such reasonable times and
intervals as Secured Party may desire, and (iv) to do whatever else
Secured Party may reasonably deem necessary to protect its
interest.
Any assignee of Secured Party shall have all of Secured
Party's rights hereunder, including the benefit of Guarantor's
warranties.
Dated: ____________________________
SECURED PARTY: ASSOCIATES COMMERCIAL CORPORATION
By:_____________________________________________________
Title:____________________________________________________
GUARANTOR: AMETECH, INC.
By:_____________________________________________________
Title:____________________________________________________
ISTE:\A-C\AMETECH\10Q\696\EXHIBIT4.2
FIFTH AFFIRMATION, EXTENSION AND AMENDMENT OF GUARANTY
Reference is made to the following documents: (i) Loan and
Security Agreement, dated as of August 27, 1993 (the "Agreement"),
between Environmental Transportation Services, Inc., an Oklahoma
corporation ("ETS"), and The CIT Group/Equipment Financing, Inc.,
a New York corporation ("CIT"); (ii) First Amendment to Loan and
Security Agreement, dated March 22, 1994 ("First Amendment"),
between ETS and CIT; (iii) Second Amendment to Loan and Security
Agreement, dated September 22, 1994 ("Second Amendment"), between
ETS and CIT; (iv) Third Amendment to Loan and Security Agreement,
dated March 7, 1995 ("Third Amendment"), between ETS and CIT; (v)
Fourth Amendment to Loan and Security Agreement, dated August 16,
1995 between ETS, Dwight Trucking, Inc., a California corporation
("Dwight") and CIT; (vi) First Amendment to Promissory Notes, dated
as of April 8, 1996 ( Promissory Note Amendment ); (vii) Guaranty
Agreement, dated as of August 27, 1993 (the "Guaranty"), made by
Ametech, Inc., an Oklahoma corporation ("Guarantor"), pursuant to
which Guaranty, among other things, Guarantor unconditionally and
irrevocably guaranteed that it would pay, when due, all amounts due
CIT from ETS pursuant to the Agreement; (viii) Affirmation,
Extension and Amendment of Guaranty, dated March 22, 1994 (the
"First Affirmation of Guaranty"); (ix) Affirmation and Extension of
Guaranty, dated September 22, 1994 (the "Second Affirmation of
Guaranty"); (x) Third Affirmation and Extension of Guaranty, dated
March 7, 1995 (the "Third Affirmation of Guaranty"); and (xi)
Fourth Affirmation and Extension of Guaranty, dated August 16, 1995
(the Fourth Affirmation of Guaranty ).
The undersigned (i) acknowledges that is has received true and
complete copies of the Agreement, the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, the
Promissory Note Amendment, the Guaranty, the First Affirmation of
Guaranty, the Second Affirmation of Guaranty, the Third Affirmation
of Guaranty, and the Fourth Affirmation of Guaranty, and (ii)
acknowledges and agrees that notwithstanding anything to the
contrary, express or implied, in the Guaranty or any other
agreement or document, that the Guaranty is hereby extended to
cover, and shall apply with full force and effect, to all of the
obligations of ETS and Dwight as set forth in the First Amendment
to Promissory Notes, a copy of which is attached hereto.
Guarantor and CIT hereby agree that clauses (f), (g), (h) and
(i) of Paragraph 6 of Rider A to the Guaranty are hereby deleted in
their entirety, and the following are inserted in lieu thereof:
"(f) maintain at all times, on a consolidated basis, a current
ratio of not less than .90 to 1.00; (g) maintain, on a quarterly
basis, a consolidated cash flow coverage ratio (defined as, for
Guarantor s immediately preceding four (4) consecutive fiscal
quarters, the ratio of Guarantor s net income (excluding
<PAGE>
extraordinary gains and non-recurring income) plus depreciation and
amortization less dividends to the current portion of long term
debt (excluding borrowings under Guarantor s revolving loan
facility) and capitalized lease obligations) of not less than (i)
.75 to 1.00 for the fiscal quarter ending 12/31/95, (ii) .50 to
1.00 for the fiscal quarter ending 3/31/96, (iii) .55 to 1.00 for
the fiscal quarter ending 6/30/96, (iv) .60 to 1.00 for the fiscal
quarter ending 9/30/96, (v) .95 to 1.00 for the fiscal quarter
ending 12/31/96, and (vi) 1.10 to 1.00 for the fiscal quarter
ending 3/31/97 and all fiscal quarters thereafter; (h) maintain a
consolidated tangible net worth (defined as total stockholders
equity less the sum of all intangibles and all outstanding
receivables and notes due from affiliates and shareholders) of not
less than (i) $4,900,000.00 for the fiscal quarter ending 12/31/95,
(ii) $4,500,000.00 for the fiscal quarters ending 3/31/96, 6/30/96,
9/31/96 and 12/31/96, and (iii) $4,500,000.00 plus fifty percent
(50%) of the quarterly earnings for the fiscal quarter ending
3/31/97 and every fiscal quarter thereafter; and (i) maintain on a
consolidated basis, a ratio of total liabilities to consolidated
tangible net worth (as defined above) of not more than (i) 2.50 to
1.00 for the fiscal quarter ending 12/31/95, (ii) 2.75 to 1.00 for
the fiscal quarter ending 3/31/96, (iii) 2.90 to 1.00 for the
fiscal quarter ending 6/30/96, (iv) 2.75 to 1.00 for the fiscal
quarter ending 9/30/96, (v) 2.75 to 1.00 for the fiscal quarter
ending 12/31/96, and (vi) 2.50 to 1.00 for the fiscal quarter
ending 3/31/97 and all fiscal quarters thereafter."
The undersigned hereby represents and warrants to CIT that
upon the execution and delivery by the undersigned of this Fifth
Affirmation, Extension and Amendment of Guaranty, the Guaranty, as
supplemented and amended by this Fifth Affirmation, Extension and
Amendment of Guaranty, and as previously supplemented and amended
by the First Affirmation of Guaranty, the Second Affirmation of
Guaranty, the Third Affirmation of Guaranty, and the Fourth
Affirmation of Guaranty, shall constitute a legal, valid and
binding obligation of the undersigned, enforceable in accordance
with its terms.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Fifth
Affirmation, Extension and Amendment of Guaranty as of the 8th day
of April, 1996.
AMETECH, INC.
an Oklahoma corporation
By: /s/ Kerry Willingham
___________________________________
Title: Controller
_________________________________
ACKNOWLEDGED AND AGREED.
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ Janice M. Wickham
____________________________
Title: Assistant Vice President
__________________________
FIRST AMENDMENT TO PROMISSORY NOTES
THIS FIRST AMENDMENT TO PROMISSORY NOTES ( First Amendment )
dated as of April 8, 1996, is entered into by and among
Environmental Transportation Services, Inc. ( ETS ), Dwight
Trucking, Inc. ( DTI ) (ETS and DTI are sometimes collectively
referred to herein as Debtors ) and The CIT Group/Equipment
Financing, Inc. ( CIT ).
WHEREAS, ETS and CIT entered into the following agreements:
(i) Loan and Security Agreement, dated as of
April 27, 1993;
(ii) First Amendment to Loan and Security
Agreement, dated as of March 22, 1994;
(iii) Second Amendment to Loan and Security
Agreement, dated as of September 22, 1994; and
(iv) Third Amendment to Loan and Security
Agreement, dated as of March 7, 1995; and
WHEREAS, ETS, DTI and CIT entered into the following
agreement:
Fourth Amendment to Loan and Security Agreement, dated as
of August 16, 1995 (the Loan and Security Agreement, as
amended by the First, Second, Third and Fourth Amendments
thereto, is referred to herein as the Agreement ); and
WHEREAS, the indebtedness of Debtors to CIT is evidenced by
eleven promissory notes (the Notes ) made by either ETS or Debtors
and payable to CIT; and
WHEREAS, Debtors have requested that they be allowed to defer
the principal payments due on the Notes in the months of February
1996 and March 1996, and make interest only payments on the Notes
in the months of February 1996 and March 1996, with the 2 deferred
principal payments to be made in the months of September 1996 and
October 1996; and
WHEREAS, Ametech, Inc. pursuant to (i) a Guaranty Agreement,
dated as of August 27, 1993, (ii) an Affirmation, Extension and
Amendment of Guaranty, dated March 22, 1994, (iii) an Affirmation
and Extension of Guaranty, dated September 22, 1994, and (iv) a
Third Affirmation and Extension of Guaranty, dated March 7, 1995
(the Guaranty Agreement, as Affirmed, Extended and Amended, is
referred to herein as the Guaranty ) unconditionally and
irrevocably guaranteed that it would pay, when due , all amounts
due CIT from Debtors; and
<PAGE>
WHEREAS, Ametech, Inc. pursuant to the Guaranty, covenanted
and agreed that it would maintain certain financial covenants for
so long as any of Debtor s indebtedness to CIT was outstanding; and
WHEREAS, Ametech, Inc. has violated certain of the financial
covenants, and has requested that CIT amend those financial
covenants; and
WHEREAS, CIT is willing to (i) amend the financial covenants
set forth in the Guaranty, and (ii) allow Debtors to defer
principal payments due on the Notes in the months of February 1996
and March 1996.
NOW, THEREFORE, in order to induce CIT to agree to (i) amend
the financial covenants set forth in the Guaranty, and (ii) allow
Debtors to defer principal payments due on the Notes in the months
of February 1996 and March 1996, CIT and Debtors hereby agree as
follows:
<TABLE>
<CAPTION>
1. The Notes, which are specifically defined as follows, are
hereby amended by increasing the applicable interest rate on each
Note, by 1.00 percent (1.00%), effective with all payments of
principal and interest becoming due in May 1996 and all subsequent
payments.
Original Monthly
Maker Principal Principal
Date of Note of Note Amount of Note Payment
__________________ _______ ______________ _________
<S> <C> <C> <C> <C>
1. September 10, 1993 ETS $4,000,000.00 $83,333.33
2. May 16, 1994 ETS $233,771.00 $3,896.18
3. July 5, 1994 ETS $217,946.40 $3,632.44
4. July 18, 1994 ETS $287,700.00 $4,795.00
5. August 31, 1994 ETS $185,455.54 $3,090.93
6. October 18, 1994 ETS $313,112.40 $5,218.54
7. December 5, 1994 ETS $260,913.36 $4,348.56
8. April 6, 1995 ETS $330,802.52 $5,513.38
9. June 5, 1995 ETS $194,194.30 $3,236.57
10. July 18, 1995 ETS $495,000.00 $8,250.00
11. August 17, 1995 ETS and DTI $823,000.00 $13,716.67
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original New
Interest Rate Interest Rate
_____________ ______________
<S> <C>
LIBOR Rate LIBOR Rate
plus 3.55% (L) plus 4.5% (L)
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
L + 3.60% L + 4.60%
</TABLE>
2. The principal payments on the Notes due in February 1996 are
hereby deferred (and shall be due and payable) in September 1996,
and the principal payments on the Notes due in March 1996 are
hereby deferred (and shall be due and payable) in October 1996.
3. This First Amendment shall be executed by the parties hereto
in three (3) counterparts, and copies of this First Amendment, when
attached to each original Note, shall thereafter constitute the
original Note.
4. Except as expressly modified by this First Amendment, all
terms and provisions of each Note are, and shall remain, unmodified
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment as of the day and year set forth above.
ENVIRONMENTAL TRANSPORTATION
SERVICES, INC.
By: /s/ Kerry Willingham
________________________________
Title: Controller
______________________________
<PAGE>
DWIGHT TRUCKING, INC.
By: /s/ Kerry Willingham
_________________________________
Title: Controller
_______________________________
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ Janice M. Wickham
_________________________________
Title: Assistant Vice President
_______________________________
ISTE:\A-C\AMETECH\10Q\696\ENVTRANS.PNA
The CIT Group/
Capital Equipment Financing, Inc.
1211 Avenue of the Americas
New York, NY 10036
THE August 16, 1996
CIT
GROUP
Mr. Kerry Willingham
Chief Financial Officer
Ametech, Inc.
1813 Southeast 25th Street
Oklahoma City, OK 73129
Environmental Transportation Services, Inc.
1813 Southeast 25th Street
Oklahoma City, OK 73129
Re: Loan and Security Agreement dated as of August 27, 1993 (and
the Amendments thereto) between Environmental Transportation
Services, Inc. and The CIT Group/Equipment Financing, Inc. and
Guaranty Agreement dated as of August 27, 1993 (including the
Riders and Amendments thereto) made by Ametech, Inc.
Ametech, Inc. is in default of the cash flow covenant contained in
Paragraph 6(g) of the Rider A to the Guaranty Agreement for the
quarter ending 6/30/96. The CIT Group/Equipment Financing, Inc.
and Ametech are currently negotiating the waiver of this default.
The CIT Group/Equipment Financing, Inc. believes we are close to
agreement and will be able to issue the waiver shortly.
Sincerely,
/s/ Janice M. Wickham
Janice M. Wickham
A company of
Dai-Ichi Kangyo Bank and
Chemical Banking Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> $ 10,000
<SECURITIES> 0
<RECEIVABLES> 4,659,000
<ALLOWANCES> 0
<INVENTORY> 165,000
<CURRENT-ASSETS> 6,485,000
<PP&E> 20,399,000
<DEPRECIATION> 9,592,000
<TOTAL-ASSETS> 17,725,000
<CURRENT-LIABILITIES> 4,875,000
<BONDS> 6,886,000
0
0
<COMMON> 139,000
<OTHER-SE> 4,439,000
<TOTAL-LIABILITY-AND-EQUITY> 17,725,000
<SALES> 0
<TOTAL-REVENUES> 9,388,000
<CGS> 0
<TOTAL-COSTS> 7,445,000
<OTHER-EXPENSES> 2,032,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 444,000
<INCOME-PRETAX> (533,000)
<INCOME-TAX> (165,000)
<INCOME-CONTINUING> (368,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (368,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
