UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended: December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission File No. 2-30680
AMETECH, INC.
____________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Oklahoma 73-0766924
_____________ ___________________
(State of (I.R.S. Employer
Incorporation) 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
______________
Securities Registered Pursuant to Section 12(b) of the Act:
None
_______
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
____________________________
<PAGE>
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 No X . The Registrant has not yet filed its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405) of this chapter is
not contained herein and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of April 15, 1997, the aggregate market value of the
2,735,818 shares of voting stock of the Registrant held by non-
affiliates of the Company equaled approximately $648,166 based on
the mean between the closing bid and ask price for the common
stock.
As of April 15, 1997, the Registrant had 13,932,188
shares of common stock issued and outstanding (excluding 115,000
shares of common stock held as treasury stock).
Documents Incorporated by Reference
None.
<PAGE>
FORM 10-K OF AMETECH, INC.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I
Page
____
<S> <C> <C>
Item 1. Business
General......................................... 1
Segment Information and Foreign and
Domestic Operations and Export
Sales........................................ 2
Item 2. Properties...................................... 6
Item 3. Legal Proceedings............................... 7
Item 4. Submission of Matters to a Vote of
Security Holders............................... 8
Item 4A. Executive Officers of the Company.............. 8
PART II
Item 5. Market for Registrant's Common Stock and
Related Security Holder Matters................ 9
Item 6. Selected Financial Data........................ 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 13
Item 8. Financial Statements and Supplementary Data..... 22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.......... 22
PART III
Item 10. Directors and Executive Officers of the
Company......................................... 22
Item 11. Executive Compensation.......................... 24
Item 12. Security Ownership of Certain Beneficial
Owners and Management........................... 26
Item 13. Certain Relationships and Related Transactions.. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.......................... 30
</TABLE>
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PART I
Item 1. BUSINESS
General.
AMETECH, Inc. (the "Company") is an Oklahoma corporation and
was formed in 1967.
Moorpark Holdings, Inc., a Delaware corporation ("Moorpark"),
and its parent company, Bank of America of Illinois, beneficially
own 10,367,122 shares, or approximately 74.4% of the 13,932,188
shares of voting securities of the Company issued and outstanding
as of April 15, 1997. As a result, Moorpark and its parent
companies are considered to be the controlling persons of the
Company. Moorpark has advised the Company that it has acquired
such shares as a passive investor and will hold such shares for
investment purposes only. See "Security Ownership of Certain
Beneficial Owners and Management.
In March, 1996, the Company's wholly owned subsidiary,
Environmental Transportation Services, Inc. ("ETS"), began leasing
from Sullivan Trucking Company, Inc., an Oklahoma corporation,
("Sullivan"), a certain number of hazardous waste tractors and
trailers and has begun to utilize such equipment to transport waste
for Sullivan's and ETS' customers. In connection with such lease,
ETS is paying Sullivan approximately $29,000 a month to lease from
Sullivan such tractors and trailers and a certain number of roll-
off boxes.
In connection with the transaction with Sullivan, the Company
has reached a tentative agreement to acquire from Sullivan its
customer list, goodwill, parts, supplies, and other business
aspects of Sullivan's hazardous waste transportation business. The
Company and Sullivan have agreed in principle that, in addition to
the above-described lease arrangements, the Company will pay
Sullivan approximately 1.3 million shares of the Company's common
stock for such customer list, goodwill, parts, supplies, and other
business aspects of Sullivan's hazardous waste transportation
business. Additionally, the Company has leased from Sullivan its
transportation terminal in Ponca City, Oklahoma, for a term of
approximately four (4) years at a rental of $3,800 per month. The
Company and Sullivan are in the process of finalizing a definitive
agreement relating to the purchase by the Company of Sullivan's
customer list, goodwill, parts, supplies and other business aspects
of Sullivan's hazardous waste transportation business.
Segment Information and Foreign and Domestic Operations and Export
Sales.
The Company's principal business is providing environmental-
related activities consisting primarily of transporting hazardous
and non-hazardous waste, and, as a result, the Company believes
that it is in only one business segment.
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<PAGE>
Other than its minority ownership (approximately 10%) in a
waste company in Mexico, the Company had no foreign operations or
export sales in 1996.
(a) Environmental Business
The Company's principal business (through its subsidiaries) is
the transportation of hazardous and non-hazardous waste.
The Company's transportation business is provided primarily to
generators and brokers of, and disposal companies handling,
hazardous and non-hazardous waste. The Company's transportation
subsidiary generally transports waste from the generator's location
to disposal, storage or treatment sites operated and owned by
others. The Company currently has transportation terminals in
Arkansas, California, Colorado, Florida, Louisiana, Oklahoma,
Tennessee, North Carolina, and Washington. See "Properties". In
1996, approximately $18,000,000, or 99%, of the Company's
consolidated revenues were related to its transportation
operations. In 1995 approximately $16,800,000, or 95%, of the
Company s consolidated revenues were related to its transportation
operations.
The Company and its subsidiaries own or lease multi-purpose
vehicles which are used in the collection and transportation of
hazardous and non-hazardous waste. The vehicles used to transport
hazardous waste are specially designed tractors and semi-trailers
to comply with applicable regulations of the U. S. Department of
Transportation ("DOT") relating to the transportation of hazardous
waste. The transportation of hazardous waste requires the Company
to annually increase and/or update its fleet of these specially
designed vehicles. In addition to using company owned vehicles to
transport waste, the Company s transportation subsidiary leases,
from time to time, vehicles owned and operated by independent
drivers. Currently, approximately one-third of the Company s total
active fleet consists of vehicles owned and operated by independent
drivers.
In the past, the Company, through subsidiaries, also performed
brokerage services for certain generator-customers. These services
required the Company to act as an intermediary for the generator-
customer with the disposal facility. In 1994, the Company decided
to deemphasize its brokering services due to the low margins and
the potential liability related to such business. As a result,
less than 1% of the Company's consolidated revenues for 1996 were
related to the Company's brokerage activities.
(b) Customers
The major customers of the Company in the environmental
related business are hazardous waste management companies and
hazardous waste brokers. For 1996, approximately 20% and 14% of
the Company's consolidated revenues were derived from
transportation-related activities for Laidlaw Environmental
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<PAGE>
Services, Inc. and its affiliates ("Laidlaw") and Rollins
Environmental Services, Inc. and its affiliates ("Rollins"),
respectively, as compared to approximately 31% for Laidlaw and 4%
for Rollins in 1995. During 1997, the United States hazardous
waste operations of Laidlaw have merged, or are being merged, with
Rollins.
(c) Competition
The environmental services industry is highly fragmented and
competition is intense. Competition is based on, among other
factors, work quality and timeliness of performance, safety and
efficiency, availability of personnel and equipment, and pricing.
The Company believes that its expertise and its reputation within
the industry for providing timely services allow it to compete
effectively. The industry, however, is, and is likely to continue
to be, dominated by much larger and better capitalized companies
than the Company. Many of the major companies that own disposal
facilities for hazardous and non-hazardous waste, which the Company
does not, compete with the Company's transportation subsidiary by
offering to their customers transportation services of such waste
from the site of generation to their disposal facilities.
(d) Environmental Damages and Personal Injury
The environmental activities involve significant risks
inherent in the management of hazardous waste. Although the
Company believes that its operations are conducted in a safe and
prudent manner, spillage, uncontrolled release or mishandling of
hazardous waste could occur which would create liability for the
Company as the result of environmental damage or personal injury.
Such an occurrence could have a material adverse effect on the
business and financial condition of the Company.
(e) Regulation and Permits
The environmental activity of the Company, and the
corresponding transportation business, are subject to extensive and
increasing federal, state, and local laws and regulations. In
addition to imposing requirements on the Company's activities
regarding hazardous waste, these regulations require the Company to
maintain various permits in order to conduct its current
transportation business. Permits are generally required by most,
if not all, states for the transportation of hazardous waste in
such states. These permits need to be renewed periodically and may
be subject to revocation, modification, denial or nonrenewal for
various reasons, including failure of the Company's transportation
subsidiary to satisfy regulatory concerns. Regulations will
require the Company to obtain additional permits in the future to
expand its transportation business into new states.
The City of Denver, Colorado requires a special use permit to
operate a hazardous waste terminal and to transfer such waste from
one truck to another at such terminal. ETS is currently operating
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its terminal in Denver without having obtained such a special use
permit. Failure to obtain such permit will require ETS to relocate
its Denver terminal to another city in Colorado in which such a
special use permit may be obtained.
Failure by the Company to obtain and maintain necessary
permits would have a material adverse effect on its business and
financial condition. The Company believes it is in substantial
compliance with existing regulatory requirements; however, the
Company cannot predict what impact future laws, rules or
regulations will have on its business or financial condition.
Further, sometimes justifiable differences in interpretations of
laws and regulations could result in unforeseen liabilities. A
failure to comply with such laws, rules and regulations could
subject the Company to fines and penalties and/or revocation of
permits issued by a state, which could have a material adverse
effect on the Company.
A discussion of the principal environmental laws affecting the
Company's Environmental Business is set forth below.
(i) RCRA and Federal Transportation Laws. The Resource
Conservation and Recovery Act, as amended ("RCRA"), provides a
comprehensive framework to regulate the generation, transportation,
disposal, storage and treatment of hazardous waste. The purpose of
RCRA is to control hazardous waste from the time such is generated
to the time of disposal. RCRA requires that the Environmental
Protection Agency ("EPA") regulations as to the transportation of
hazardous waste be consistent with the federal Department of
Transportation ("DOT") regulations under the Hazardous Materials
Transportation Act ("HMTA").
RCRA and HMTA regulate any party who transports hazardous
waste, whether in interstate or intrastate commerce. These laws
and the regulations promulgated thereunder regulate, among other
things, the transportation of hazardous waste and provide that such
is subject to a manifest system, regulates the record keeping
concerning the source and delivery points of hazardous waste, the
proper labeling of transported waste, equipment specifications and
insurance requirements. In addition, these laws and the
regulations promulgated thereunder require that a transporter must
deliver waste in accordance with the manifest prepared by the
generator of the waste and may only deliver such to a disposal,
treatment or storage facility having a RCRA permit or interim
status under RCRA.
Demand for the Company's transportation services is
substantially dependent upon the continuation of the regulation of
the treatment, disposal and transportation of hazardous waste under
federal and state laws and regulations. The repeal of these laws
or any significant relaxation of their requirements as to the
transportation of hazardous waste could significantly reduce the
demand for the transportation services offered by the Company and
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could have a material adverse effect on its business and financial
condition.
(ii) Health and Safety Regulations. The operations of the
Company's Environmental Business are subject to the requirements of
the Occupational Safety and Health Act ("OSHA") and comparable
state laws. Regulations promulgated under OSHA and the Department
of Labor require employers of persons in the transportation and
environmental industries, including independent contractors, to
implement work practices and personal protection programs in order
to protect employees from equipment safety hazards and exposure to
hazardous chemicals. It is also anticipated that oversight of the
Company's operations by regulatory agencies charged with protecting
health and safety will increase, resulting in increased cost and a
greater potential for imposition of penalties for noncompliance.
The Company has used its best efforts to establish programs for
complying with health and safety regulations. While the Company
believes it operates safely and prudently, there can be no
assurance that accidents will not occur or that the Company will
not incur substantial liability in connection with the operation of
its business. The Company could, for example, be subjected to
litigation in the event of an accident, such as a traffic accident
or inhalation of harmful chemicals. To the extent that any such
claim would not be covered or would only be partially covered by
insurance, the Company could be materially adversely affected.
(iii) Superfund. In 1980, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, commonly known as
"Superfund" or "CERCLA", was enacted.
Superfund provides for EPA-coordinated response and removal
actions to releases of hazardous substances into the environment,
and authorizes the federal government either to clean up facilities
at which hazardous substances have created actual or potential
environmental hazards or to order persons responsible for the
situation to do so. Superfund also provides for the recovery of
costs in connection with the clean-up of a site where hazardous
substances have been released. Superfund attempts to allocate
these responses and other related costs among parties involved in
the generation, transportation and disposal of such hazardous
substances. Superfund has been interpreted as creating among
liable parties strict, joint and several liability for costs of
removal and remediation, other necessary response costs and damage
to natural resources. Liability under Superfund extends to four
categories of parties: (i) owners and operators of a facility from
which a release occurs, (ii) persons who owned or operated a
facility at the time the hazardous substances were disposed of at
such a facility, (iii) persons who arranged for disposal or
treatment of a hazardous substance at or transportation of a
hazardous substance to such facility (i.e., generators of such
hazardous substances), and (iv) transporters who selected such
facility for treatment or disposal of hazardous substances.
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<PAGE>
Superfund also authorizes (i) private litigants who have
incurred response costs in the clean-up of a site contaminated with
hazardous substances to bring an action, under certain conditions,
for contribution against other parties who may be liable under
Superfund, and (ii) citizens to bring suits under certain
conditions against any person, including the United States, who is
alleged to be in violation of any standard, regulation, condition
or order which has become effective under Superfund.
In addition to Superfund, certain individual states have
enacted their own statutory schemes to respond to release of
hazardous substances, to order responsible parties to conduct
removal action from liable parties. Parties who could be liable
under the states' mini-Superfund statutes are generally the same
parties that are liable under Superfund.
(f) Insurance
The Company is required to maintain specified types and
amounts of insurance in order to conduct its current business of
transportation of hazardous and non-hazardous waste. Obtaining
adequate insurance is a problem faced by the Company and the
hazardous waste industry as a whole due to the limited number of
insurers and the increasing cost of coverage. To the best of the
Company's knowledge, the Company currently has insurance sufficient
to satisfy all applicable regulatory requirements. Although the
Company believes that it will be able to obtain renewals of, or
replacements for its existing coverage, there can be no assurance
that the Company will be able to maintain insurance in compliance
with regulatory requirements. Failure to satisfy these regulatory
insurance requirements could have a material adverse effect on the
Company's business and financial condition.
(g) Employees
As of December 31, 1996, the environmental business of the
Company had approximately 135 full-time employees, none of whom
were represented by a union.
Item 2. PROPERTIES
The Company's environmental business is conducted through both
owned and leased facilities. The Company and/or one of its
subsidiaries owns, subject to a mortgage, a six-acre tract of land
in Oklahoma City, Oklahoma, which contains an office building of
approximately 15,000 square feet. See Certain Relationships and
Related Transactions . This facility is being used by the Company
as its executive office, as well as the Company's Oklahoma City
transportation terminal.
In addition, the Company and/or its subsidiaries leases
transportation terminals in El Dorado, Arkansas; Bakersfield,
California; Denver, Colorado; Jacksonville, Florida; Sulphur,
Louisiana; Stoneville, North Carolina; Ponca City, Oklahoma; Atoka,
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Tennessee; and, Centralia, Washington. The Company's subsidiary
also owns a terminal in Chattanooga, Tennessee. The facilities in
Bakersfield, California; Ponca City, Oklahoma; and Chattanooga,
Tennessee contain office facilities. See "Business--Regulations
and Permits".
The Company believes that the above properties are
suitable and adequate for the Company's presently anticipated
needs.
Item 3. LEGAL PROCEEDINGS
ETS has been sued by a group of persons who allege to be
residents of Smith County, Texas, or have either worked or lived in
or near Winona, Smith County, Texas, as a result of transporting
waste to a permitted hazardous waste injection well disposal
facility located in Smith County, Texas ( Disposal Facility ).
Plaintiffs have sued approximately 85 other defendants, who either
are alleged to have generated waste that was disposed of at the
Disposal Facility or are the owners of the Disposal Facility. The
lawsuit is styled Adams, et al v. American Ecology Environmental
Services Corporation f/k/a Gibraltar Chemical Resources, Inc. f/k/a
Gibraltar Wastewaters, Inc., Motheral Printing Co., et al., Cause
No. 236-165224-96, pending in the District Court, Tarrant County,
Texas. The lawsuit was filed in August, 1996, but ETS was not
served with such lawsuit until February, 1997. Plaintiffs alleged
that the Disposal Facility is owned and operated by American
Ecology Environmental Services Corporation f/k/a Gibraltar Chemical
Resources, who is not affiliated or related to the Company. None
of the other defendants are affiliates of the Company. Plaintiffs
alleged that the owners of the Disposal Facility were negligent
under various theories in the operation of the Disposal Facility.
Plaintiffs also alleged that the generator and transporter
defendants were negligent under various theories in not ensuring
that the owner of the Disposal Facility properly operated the
Disposal Facility. The Plaintiffs have sued for an unspecified
amount of actual and punitive damages. The Company has recently
filed an answer in this matter and has not had an opportunity to
investigate such. The Company intends to vigorously defend itself
in this matter.
In March, 1993, the Company was advised that its insurance
carrier had denied coverage relating to a lawsuit filed by seven
(7) individuals against Dyna-Turn of Oklahoma Incorporated ("Dyna-
Turn") and a subsidiary of the Company, Environmental
Transportation Services, Inc. ("ETS"), styled Darrell Stafford, et
al. v. Dyna-Turn of Oklahoma Incorporated, et al., pending in the
District Court of Oklahoma County, Oklahoma (the "Lawsuit"). The
Lawsuit was filed in January, 1992. The plaintiffs were employees
of a waste incineration facility and allege that (i) Dyna-Turn
generated certain waste contaminated with toxic and hazardous
chemicals; (ii) that the waste was transported by ETS, and (iii)
that Dyna-Turn was negligent in the generation and ETS was
negligent in the transportation of such waste and in failing to
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warn these plaintiffs of the hazardous nature of the waste. In the
Lawsuit, the plaintiffs are alleging that they sustained certain
personal injuries and are seeking unspecified damages in excess of
$10,000 and punitive damages. The Lawsuit is presently in the
discovery stage. The Company believes that it has defenses to the
Lawsuit, but at this stage is unable to determine the amount of any
potential exposure that it may incur as a result thereof. The
Company intends to vigorously defend itself in the Lawsuit. At
this time, the Company does not anticipate that the Lawsuit will
have a material adverse effect on the Company or its financial
condition, but there can be no assurances to that effect.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Item 4A. EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
The following are the executive officers of the Company:
Name and Position Date Elected
with Company(1) Age to Office
________________________ ____ _______________
<S> <C> <C>
Carl B. Anderson, Jr.(2) 75 January 10, 1991
Chairman of the Board,
President, and Chief
Executive Officer
Kerry J. Willingham (3) 42 October 24, 1996
Vice President and
Chief Financial Officer
David R. Bennett (4) 48 April 1, 1997
Executive Vice-President
Environmental Transportation
Services, Inc.
_______________________
<FN>
(1) There is no family relationship between any of the executive
officers.
(2) Mr. Anderson served as Chairman of the Board and Chief
Executive Officer of American Environmental Technologies, Inc.
("AET") from June, 1986, until AET's merger with and into the
Company in January, 1991 (the "Merger"). Since the Merger,
Mr. Anderson has served as Chairman of the Board and Chief
Executive Officer of the Company. In addition, for a period
in excess of five years, Mr. Anderson served as a general
partner of AnSon Partners Limited Partnership. Mr. Anderson
assumed the position of President of the Company in October,
1995.
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(3) Mr. Willingham was employed by the Company in January, 1991 as
Controller. Effective October 26, 1996, Mr. Willingham was
elected Vice President - Finance, Secretary, and Treasurer of
the Company. Prior to January, 1991, Mr. Willingham served as
Controller for Stik-Strip, Inc. in Oklahoma City, Oklahoma.
Mr. Willingham is a Certified Public Accountant.
(4) Mr. Bennett has been employed by ETS since February, 1997, and
was elected Executive Vice-President of ETS on April 1, 1997.
From 1991 through December, 1996, Mr. Bennett served as
Director of Sales and Marketing for Tri-State Motor Transit
Co., in Joplin, Missouri. Prior to 1991, Mr. Bennett managed
various chemical processing operations for Able Body
Corporation, in Joplin, Missouri from 1989 to 1991 and for
W. R. Grace & Co., in Joplin, Missouri from 1983 to 1989.
Although Mr. Bennett is not an executive officer of the
Company, he is included in this table due to the fact that
approximately 99% of the Company's revenues for 1996 are
derived from the operations of its subsidiary, ETS, for which
Mr. Bennett serves as an executive officer.
</FN>
</TABLE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
<TABLE>
<CAPTION>
The Company's common stock trades on the OTC Bulletin Board. The
following table gives the range of inter-dealer bid and asked
quotations during each calendar quarter of 1996 and 1995, according
to information supplied by a market maker. These quotations are
among dealers, do not include markups, markdowns, or commissions,
and may not represent actual sales.
BID ASKED
________________ _______________
High Low High Low
1996 _____ _____ _____ ______
____________
<S> <C> <C> <C> <C>
1st Quarter $ .22 $ .13 $ .38 $ .22
2nd Quarter .19 .06 .31 .19
3rd Quarter .09 .06 .22 .19
4th Quarter .06 .03 .22 .13
</TABLE>
<TABLE>
<CAPTION>
1995
____________
<S> <C> <C> <C> <C>
1st Quarter $ .13 $ .06 $ .38 $ .13
2nd Quarter .40 .13 .75 .31
3rd Quarter .31 .13 .67 .25
4th Quarter .38 .13 .50 .25
</TABLE>
At April 15, 1997, there were 1,130 holders of record of the
Company's common stock, par value $.01.
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The Company did not declare a cash dividend on its common stock
in 1996 or 1995. It is anticipated that for the foreseeable future
any earnings which may be generated from the operations of the
Company will be used to finance its operations and growth and that
cash dividends will not be paid to holders of the common stock of
the Company. Any decision by the Board of Directors of the Company
to pay cash dividends in the future will depend upon, among other
factors, the Company's earnings, financial condition and capital
requirements.
Pursuant to the terms of the loan agreement between ETS, the
principal operating subsidiary of the Company, and its lender, ETS
is prohibited from, among other things, (i) declaring and paying
any dividends, (ii) making any distributions on account of its
stock, (iii) making any loans to the Company, or (iv) invest in the
Company. Since the Company is a holding company, it is dependent
upon its subsidiaries to pay dividends and make distributions to
the Company before the Company is able to pay any dividends.
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Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
(In thousands except share amounts)
<S> <C> <C> <C>
Revenues $ 18,112 $ 17,650 $ 14,945
Operating Earnings (Loss) (605) 11 573
Net Earnings (Loss)
Before change in
accounting principle (1,165) (494) 80
Net earnings (loss) $ (1,165) $ (362) $ 80
Earnings (Loss) Per
Common Share:
Net earnings (loss)
before change in
accounting principle $ (0.08) $ (0.04) $ 0.01
Net earnings (loss) $ (0.08) $ (0.03) $ 0.01
Weighted Average Number
of Common Shares
Outstanding 13,798,088 13,735,203 13,655,901
Total Assets $ 13,821 $ 16,726 $ 13,559
Long-term Obligations
(excluding deferred
taxes)
Current portion 7,306 2,126 2,579
Long-term portion 393 6,242 3,717
Cash Dividends
per Share $ - $ - $ -
</TABLE>
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<TABLE>
<CAPTION>
1993 1992
----------- -------------
(In thousands except
share amounts)
<S> <C> <C>
Revenues $ 14,377 $ 15,918
Operating Earnings 878 1,103
Net Earnings (Loss)
Before Change in
Accounting Principle (184) 771
Net Earnings (Loss) (184) 771
Earnings (Loss)Per
Common Share:
Net earnings (loss)
before change in
accounting principle $ (0.01) $ 0.06
Net earnings (loss) $ (0.01) $ 0.06
Weighted Average Number
of Common Shares
Outstanding 13,585,191 13,647,567
Total Assets $ 11,887 $ 12,424
Long-term Obligations
(excluding deferred
taxes)
Current portion 1,903 2,034
Long-term portion 2,897 3,242
Cash Dividends
per Share $ - $ -
</TABLE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements.
Certain statements contained within this "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" may be deemed "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended
(collectively, the "Private Securities Litigation Reform Act of
1995").
The forward-looking statements contained herein relate to
anticipated financial performance, business prospects, market
forces, financing prospects, relationships with certain lenders and
potential lenders and defaults under certain credit agreements with
the Company's current lenders, and all other statements which are
not statements of historical fact. While the Company believes the
expectations reflected in such forward-looking statements are
reasonable, it can give no assurance such expectations will prove
to have been correct. There are a variety of factors which could
cause future outcomes to differ materially from those described in
this Form 10-K, including, but not limited to, general economic
conditions, increased competitive pressures, overcapacity in the
environmental transportation industry, changes in federal, state
and local laws and regulations, especially environmental
regulations, or in interpretation of such, potential increases in
equipment, maintenance, operating or labor costs, the Company's
ability to obtain external financing to replace existing financing
and to reach an acceptable agreement with its lenders with which
the Company is currently in default, willingness of creditors to
waive defaults or breaches of financial covenants of the Company,
and management retention and development. See "--Liquidity and
Capital Resources" for a discussion of additional factors that may
affect such results." The Company undertakes no obligation to
update publicly any forward-looking statement, whether as a result
of new information, future events or otherwise.
The following Management's Discussion and Analysis should be
read in conjunction with a review of the Company's December 31,
1996, Consolidated Financial Statements included elsewhere in this
Form 10-K.
Results of Operations
Year Ended December 31, 1996 Compared to Year Ended December 31,
1995
Total revenues for 1996 were approximately $18,112,000, as compared
to approximately $17,650,000 for 1995, an increase of approximately
$462,000, or 3%. This increase was due to an increase in
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<PAGE>
transportation and related revenues of approximately $1,232,000
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 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 $.08 per mile due to continuing competitive
pressures. Other transportation related revenues decreased
approximately $68,000.
Non-transportation related revenues decreased approximately
$763,000 from 1995 to 1996 due to decreased revenues generated by
the Company s non-hazardous waste transfer facility located in
Florida (which was sold in September 1996) 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.
The net loss for 1996 was approximately $1,165,000, as compared to
a net loss for 1995 of approximately $362,000. This increase in
the net loss was due primarily to a decrease in the gross margin
(revenues less operating costs) of approximately $1,190,000 and to
losses on sales of transportation equipment.
Total operating costs were approximately $14,862,000 and
approximately $13,210,000 for 1996 and 1995, respectively. These
amounts represent approximately 82.1% and approximately 74.8% of
total revenues for the respective years of 1996 and 1995, an
increase of approximately 7.3%.
Operating costs related to transportation services were
approximately $14,768,000 and approximately $12,575,000
(approximately 82.1% and approximately 75.1% of transportation and
related revenues) for 1996 and 1995, 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.
Operating costs not related to transportation services decreased
approximately $533,000 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.
This remediation project was completed in May, 1995, and the
Company's remediation subsidiary is presently inactive.
General and administrative expenses decreased approximately
$406,000 from 1995 to 1996 due largely to reduced personnel and a
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<PAGE>
reduction in 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, which operated
for all of 1996 as compared to six months of 1995.
Depreciation expense decreased approximately $168,000 due to the
Company changing the useful life on its trailers from ten to
fifteen years and to the sale of transportation equipment. This
decrease was partially offset by the Company s transportation
subsidiary s California operation s depreciation expense, which
California operation was acquired by the Company effective July 1,
1995, and to depreciation associated with the assets purchased in
July, 1995, relating to the Company s transportation subsidiary s
Colorado operation.
Other expense increased approximately $485,000 from 1995 to 1996
due primarily to losses recognized on the sale of (1) the Company s
transportation subsidiary s facility located in LaPorte, Texas; (2)
the non-hazardous waste processing facility located in Green Cove
Springs, Florida and (3) transportation equipment.
Interest expense increased approximately $152,000 from 1995 to 1996
due to increased debt and higher interest rates.
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31,
1994.
The net loss for 1995 was $362,000, as compared to net income
in 1994 of $80,000. This decrease was due primarily to a decrease
in the gross margin (revenues less operating costs) of $423,000,
increased general and administrative costs of $245,000 and higher
interest expense of $272,000.
Total revenues were $17,650,000 and $14,945,000 for 1995 and
1994, respectively, an increase of $2,705,000 or 18%. Revenues
from transportation and related activities increased $2,325,000,
while waste brokerage revenue decreased $160,000. Additionally,
revenues related to BMH Materials, Inc. ("BMH"), the Company's
subsidiary involved in the processing, brokering, and disposal of
non-hazardous waste in Florida, increased $341,000 over 1994. BMH
began operations in May 1994. Other revenues consisting of site
remediation and training services increased from $174,000 in 1994
to $377,000 in 1995, due to one remediation project.
Transportation and related revenues were $16,751,000 and
$14,426,000 for 1995 and 1994, respectively; comprising 95% and 97%
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<PAGE>
of total revenues of the Company. This increase is primarily
attributable to an increase in transportation revenue of $2,398,000
resulting from the purchase of additional tractors in Colorado in
July, 1995, the purchase of a transportation company in California
effective July 1, 1995, and the addition of tractors owned by
owner/operators. The Company's transportation fleet logged
9,700,000 miles for 1995 as compared to 7,400,000 miles for 1994.
This increase in miles was partially offset by a decrease in the
running mile rate of $0.06.
Waste brokerage revenue decreased $160,000 from 1994 to 1995
as the Company continues to de-emphasize its brokerage business due
to the lower margins and the potential liability related to the
brokerage business.
Total operating costs increased from $10,082,000 in 1994 to
$13,210,000 in 1995. This translates to an increase of 7.3
percentage points when expressed as a percentage of total revenue.
Operating costs related to transportation services increased
$3,002,000 from 1994 to 1995. When expressed as a percentage of
transportation and related revenues, operating costs were 75% and
66% of revenues for 1994 and 1995, respectively. This increase of
nine percentage points is primarily attributable to the lower
running mile rate as discussed earlier and to increased
owner/operator and trailer rental expenses.
Operating costs for 1995 and 1994 related to waste brokerage
services were $8,000 and $133,000, respectively, a decrease of
$125,000, as a result of the Company de-emphasizing its brokerage
activity as discussed above.
Operating costs related to the Company's non-hazardous waste
facility in Florida increased $167,000 from 1994 to 1995. This
facility began operations in May, 1994, and the increase is due
principally to such facility being in operation a full year for
1995, as compared to seven months in 1994.
Operating costs related to site remediation increased $218,000
due to the project mentioned earlier.
General and administrative expenses increased $245,000, from
1994 to 1995 due primarily to increased travel and contract labor
expenses and also to the general and administrative expenses
incurred by the California transportation company acquired in 1995.
Other expense decreased $49,000 due primarily to lower
consulting fees.
Depreciation expense decreased $106,000 from 1994 to 1995.
This decrease was due to increasing the useful life on tractors
from seven to ten years which decreased depreciation for 1995 by
$408,000.
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<PAGE>
Interest expense increased $272,000 due to higher interest
rates and increased debt.
Liquidity and Capital Resources
Working capital decreased from $508,000 at December 31, 1995 to a
negative $3,806,000 at December 31, 1996. This decrease of
approximately $4,314,000 has resulted primarily from reclassifying
the long-term portions of certain equipment debt and debt relating
to a revolving working capital line of credit to current
liabilities as discussed below. See Note 6 to Notes to
Consolidated Financial Statements.
The Company's transportation subsidiary has an equipment financing
arrangement with the CIT/Equipment Financing, Inc. ("CIT"). As of
December 31, 1996, the principal amount owing to CIT for the
purchase of transportation equipment is $3,218,000. This equipment
loan is payable in monthly principal payments of $135,000 plus
interest. In the first quarter of 1996, the Company paid only the
interest portion of the February and March loan payments to CIT due
to a cash flow shortage. CIT and the Company then entered into an
agreement whereby the Company had to pay the February and March
principal payments in September and October 1996. Additionally,
CIT increased the interest rate by one percentage point for the
remaining term of such loans by CIT, and the Company and CIT
entered into a letter agreement whereby the Company agreed to pay
CIT $105,500 by September 30, 1996 and $105,500 by December 31,
1996 in addition to its regular monthly payments to CIT. The
Company did not make the above principal payments as agreed and
also has not made all of its regular monthly principal payments
since August 1996. As a result, the Company received a letter
dated October 28, 1996 from CIT stating that the Company was in
default for past due principal payments in the amount of
$351,638.46 and that this amount must be paid by October 31, 1996.
The Company was unable to make this payment and continues to be in
default. The Company has been negotiating with CIT regarding
possible cure of its default on the equipment loans; however, as of
the date of this report the Company and CIT have not reached a
formal agreement. The Company continues to pay monthly interest
payments as well as principal payments when the Company is able.
Additionally, The Company has liquidated certain transportation
equipment that secured CIT's loans and has used the proceeds to
reduce the outstanding balance of such loans. As a result of the
default with CIT, the Company has reclassified approximately
$1,799,000 due to CIT from long-term liabilities to current
liabilities under generally accepted accounting principles. The
Company is in the process of attempting to finalize a new proposed
financing arrangement with a new lender, as discussed below, to
replace the loans with CIT and other lenders. In the event the
Company cannot finalize the new proposed financing arrangement or
obtain alternative external financing to repay CIT and is unable to
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<PAGE>
reach an acceptable agreement with CIT to cure the Company's
default, the Company does not currently have sufficient liquidity
or available resources to enable it to immediately repay the debt
to CIT, and, in such event, the Company would have to consider
taking steps necessary to protect itself from CIT seizing assets of
the Company or otherwise attempting to immediately collect
repayment of such loan.
In February 1996, the Company entered into a revolving working
capital line of credit agreement (the "Associates Agreement ) with
Associates TransCapital Services, Inc. which provides for a
$3,000,000 line of credit for working capital purposes. This
revolving 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. The
interest on the note is payable monthly and principal payments are
made as accounts receivable are collected. At December 31, 1996
the Company had borrowed $2,488,000 under the Associates Agreement,
and at December 31, 1995, the Company had borrowed $1,549,000 under
its former revolving credit agreement which has been paid. As of
April 15, 1997, the Company had approximately $91,000 of
availability under the Associates Agreement, based upon 80% of its
outstanding eligible accounts receivable on such date. Under the
terms of the Associates Agreement, the Company's inability to meet
debts as they mature may be a default under the Associates
Agreement. If the Company is able to complete the proposed new
financing discussed below, such would replace the working capital
line of credit the Company presently has with Associates. As a
result of the default with CIT, the Company has reclassified, under
generally accepted accounting principles, approximately $2,488,000
due under the Associates Agreement as current liabilities that
would otherwise be classified as long-term debt.
Associates continues to lend to the Company under the Associates
Agreement and has not advised the Company that it desires to
terminate the Associates Agreement. However, as a result of the
default under the Associates Agreement, Associates could terminate
the Associates Agreement and demand immediate repayment of the
outstanding balance under the Associates Agreement. If the Company
is unable to complete the proposed new financing, discussed below,
or obtain alternative external financing and the Company cannot
reach an acceptable agreement with Associates to cure the Company's
default, the Company does not have sufficient liquidity or
available resources which would enable it to immediately repay the
debt to Associates if Associates were to demand such.
The Company has an equipment lending arrangement with Associates
Commercial Corporation ("ACC"), an affiliate of Associates
TransCapital Services, Inc., under which the Company owed ACC
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<PAGE>
approximately $1,205,000 as of December 31, 1996. The Company was
unable to make its scheduled payments for September, October and
November, 1996; however, ACC agreed to defer these three months'
principal payments to the end of the respective notes. At
December 31, 1996, and as of June 19, 1997, the Company was in
default of certain debt covenants contained within the agreement
with ACC regarding timely annual financial reporting and current
debt payments with other creditors. As a result, the entire amount
owed under the agreement with ACC, which was approximately
$1,205,000 as of December 31, 1996, is callable by ACC, and
accordingly, under GAAP, such amount has been reclassified by the
Company as a current liability rather than a long-term debt. If
the Company is able to complete the proposed new financing, as
discussed below, such would replace the equipment lending
arrangement the Company presently has with ACC.
The Company has been seeking a new lender to replace CIT, its other
equipment lenders, and its working capital line of credit. In
connection therewith, the Company has received a proposal letter,
which is not a commitment, from a potential lender which proposes
extending credit to the Company such that all of the Company's
equipment loans, as well as working capital line of credit, would
be replaced by the financing ("Proposed New Financing"). The
Proposed New Financing would, if completed, consist of a term loan
of approximately $6 million and a revolving working capital line of
credit up to approximately $5 million, for a total loan package of
approximately $11 million. Under the terms of the Proposed New
Financing, the amount that may be borrowed by the Company under the
revolving working capital portion of the Proposed New Financing
will be based on 80% of the outstanding eligible accounts
receivable of the Company and ETS from time to time less certain
reserves. If the Proposed New Financing had been completed as of
June 20, 1997, the Company's availability as of such date under the
revolving working capital portion of the Proposed New Financing
would have been $934,000. If the Proposed New Financing is
completed, such will be secured by substantially all of the assets
of the Company. Although such potential lender has not issued to
the Company a commitment as to the Proposed New Financing, such
Proposed New Financing has been approved by the credit committee of
the potential lender, but closing of the Proposed New Financing is
still subject to further due diligence being conducted by such
lender to its satisfaction, a determination by the potential lender
that the Company has collateral in an amount satisfactory to such
lender and to the finalization of definitive loan documents between
such lender and the Company. No assurance can be made that the
Proposed New Financing will be completed or that any comparable
financing will be obtainable by the Company.
If the Company is unable to complete the Proposed New Financing,
the Company will be required, if possible, to secure other
financing to pay CIT or to negotiate a resolution with CIT,
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<PAGE>
Associates and ACC of the defaults, and if unable to accomplish
either, the Company may have to take such steps necessary to
protect the Company from actions that CIT, Associates, or ACC could
take against the Company, such as requesting the appropriate court
to protect the Company from its creditors.
In February 1996, Carl Anderson, Jr., CEO and acting President,
loaned the Company $195,000 bearing interest at 11% per annum. The
principal balance of the loan is payable on demand, but not later
than February 1, 2001 with interest payable monthly. The loan was
for working capital purposes and is secured by a mortgage on the
Company s property in Oklahoma City, Oklahoma. The outstanding
balance on this loan at December 31, 1996 was $172,000.
The Company s transportation subsidiary has entered into two lease
agreements with Sullivan s Trucking Company, Inc. ( Sullivan ),
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. Subsequently,
ETS and Sullivan agreed to terminate the twenty four month lease
effective August 1, 1996, and ETS has returned all equipment
subject to the lease to Sullivan. Additionally, the Company has
leased from Sullivan its transportation terminal in Ponca City,
Oklahoma for a term of four years, effective March 1, 1996, at a
rental of $3,800 per month.
The Company has reached an agreement in principle to acquire from
Sullivan certain customer lists, goodwill, inventory, and other
business aspects of Sullivan s hazardous waste transportation
business. Under the tentative agreement, the Company will pay
Sullivan 1,309,221 shares of the Company s common stock. The
Company and Sullivan are in the process of finalizing definitive
agreements relating to these transactions
The Company s accounts payable continue to age beyond normal terms.
As of December 31, 1996, the Company's accounts payable in excess
of sixty days were approximately $206,000 and in excess of ninety
days were approximately $115,000.
In August, 1996, a judgment of approximately $115,000 was entered
against ETS in favor of Richard K. Larson, a former employee, in a
case involving Mr. Larson ("Larson Case"). The Larson Case alleged
breach of a consulting agreement between ETS and Mr. Larson.
Pursuant to the terms of a structured payment plan agreed to by ETS
and Mr. Larson ("Payment Plan"), ETS has paid $35,000 toward
satisfaction of the judgment, leaving approximately $80,000
remaining to be paid. ETS, however, has been in default on the
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<PAGE>
Payment Plan since January, 1997. Although ETS has been attempting
to conduct further negotiations with Mr. Larson regarding the
Larson Case judgment, such negotiations have been unsuccessful. In
May, 1997, Mr. Larson informed ETS that if he is not paid in full
the amount owed to him pursuant to the judgment, he will file a
writ of execution is filed against assets of ETS in order to
satisfy the unpaid portion of the judgment. If the Company is
unable to complete the Proposed New Financing, the Company may not
have the liquidity to pay such judgment in the event a writ of
execution against the assets of ETS. If the Company completes the
Proposed New Financing, it plans to pay such judgment out of the
proceeds of such Proposed New Financing.
In order to generate additional liquidity, during August 1996, the
Company sold one of the facilities owned by its transportation
subsidiary and a facility owned by another subsidiary that
processed 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 received approximately $275,000 as a tax
refund in September 1996, and $187,000 as a prepayment of a note
due the Company in February, 1997. All of the proceeds received by
the Company referred to in this paragraph were applied by the
Company to reduce the outstanding balance under the Company's
working capital line of credit.
If the Company is able to reach a satisfactory agreement with CIT
relating to the transportation equipment loan, or is able to
complete the Proposed New Financing discussed above, the Company
believes, as of the date of this report, that it will be able to
meet its presently foreseeable working capital requirements. If
the Company is unable to reach such agreement with CIT or is unable
to complete the Proposed New Financing, the Company does not
believe that it will be able to meet its presently foreseeable
working capital requirements. The above statements contained in
this paragraph are forward-looking statements that involve a number
of risks and uncertainties that could cause actual results to
differ materially, such as its ability to complete the Proposed New
Financing or to reach a satisfactory agreement with CIT, a material
reduction in revenues, inability to collect a material amount of
receivables, required capital expenditures in excess of those
presently anticipated, or other future events, not presently
predictable, which individually or in the aggregate could impair
the Company's ability to obtain funds to meet its requirements.
See "--Forward-Looking Statements."
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<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company has included the financial statements and
supplementary financial information required by this item
immediately following Part IV of this report and hereby
incorporates by reference the relevant portions of those statements
and information into this Item 8.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
Directors.
_________
<TABLE>
<CAPTION>
The Certificate of Incorporation of the Company provides that the
number of directors shall be as set forth in the Bylaws, and the
Bylaws provide for no less than four (4) nor more than nine (9)
directors. Pursuant to the Bylaws, the Board of Directors has set
the number of directors at four (4). Each director serves for a
term of one (1) year or until their respective successors are duly
elected and qualified.
Name Age Position
- ----------------------- --- ----------------------
<S> <C> <C>
Carl B. Anderson, Jr.(1) 75 Chairman of the
Board, President
and Chief Executive
Officer
James E. Brown(2) 45 Director
Jay T. Edwards(3) 65 Director
Allen G. Poppino(4) 71 Director
___________
<FN>
(1) Mr. Anderson has served as Chairman of the Board and Chief
Executive Officer of the Company since January, 1991. See
"Executive Officers of the Company" and footnote (1)
thereunder for a discussion as to Mr. Anderson.
(2) Mr. Brown served as director of the Company from 1986 to
August, 1990, whereupon he resigned to avoid a conflict of
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interest relative to the merger of AET with and into the
Company. He was reelected to the Board in January, 1991,
upon consummation of such merger. Mr. Brown is currently
the Vice President of Finance for AnSon Gas Corporation,
where he has been employed since 1982.
(3) In November, 1993, General Edwards became the General
Administrator of the Oklahoma Corporation Commission.
Prior to taking this position, he was a senior management
consultant for Tennessee Associates, specializing in total
quality management programs from April, 1991, to November,
1993. From January, 1986, to April, 1991, he served as
President of CMI Corporation, a publicly held manufacturer
of road construction equipment. Prior to January, 1986,
General Edwards served as Executive Director of the
University of Oklahoma Energy Center and as Commander of
the United States Air Force Air Logistics Center in
Oklahoma City. He is a retired Air Force Major General.
(4) Mr. Poppino, currently is a consultant to The Benham Group
and is President and Chief Executive Officer of Poppino,
Inc. Mr. Poppino was formerly Vice Chairman of the Board
of Directors of the Benham Companies, where he was employed
(including its predecessors) from 1951 to 1990.
</TABLE>
Family Relationships. There are no family relationships
between the members of the Board of Directors of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance.
[Based solely on review of copies of the Forms 3, 4 and 5 and
amendments thereto furnished to the Company with respect to 1996,
or written representations that no such reports were required to be
filed with the Securities and Exchange Commission, the Company
believes that during 1996 all directors and officers of the Company
and beneficial owners of more than ten percent (10%) of any class
of equity securities of the Company registered pursuant to Section
12 of the Securities Exchange Act of 1934 (the "Exchange Act")
filed timely all Forms 3, 4, or 5, as required by Section 16(a) of
the Exchange Act, except Kerry Willingham did not timely file a
Form 3 to report his election as an officer of the Company in 1996,
and Carl Anderson did not timely file a Form 4 or a Form 5 to
reflect one transaction occurring in 1995.
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<PAGE>
Item 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
The following table shows the aggregate cash compensation
which the Company and its subsidiaries paid or accrued to the Chief
Executive Officer of the Company. None of the four most highly
paid executive officers of the Company received total compensation,
including salary and bonus, for the last completed fiscal year in
excess of $100,000. The table below includes cash distributed for
services rendered during 1996, plus any cash distributed during
1996 for services rendered in a prior year, plus amounts deferred
at the election of the named executive officer, less any amount
relating to those services previously included in the cash
compensation table for a prior year.
Annual Compensation
----------------------------------
Other Annual
Name and Salary Bonus Compensation
Principal Position Year ($) ($) ($)
- ------------------ ---- ------- ----- -------------
<S> <C> <C> <C>
Carl B. Anderson 1996(1) 12,000(1) - 6,000(1)
Chairman of the 1995(1) 12,000(1) - 3,000(1)
Board, President 1994(1) 12,000(1) - -
and Chief Executive
Officer
Long-term
Compensation
Awards
- -------------
All Other
Stock Options Compensation ($)
- ------------- ----------------
<C> <C>
- -
- -
- -
______________
<FN>
(1) The amount shown represents the compensation paid to
Mr. Anderson in his capacity as Chairman of the Board. The
Company does not compensate Mr. Anderson for his service as
CEO and President. In addition, beginning July, 1995,
Mr. Anderson received a monthly automobile allowance of
$500.00.
</FN>
</TABLE>
401-K. The Company has adopted an Employee Savings Plan ("401-
K Plan") for its employees of the Company and its subsidiaries,
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<PAGE>
with certain exceptions. The 401-K Plan provides for employee
contribution, and further provides the Company may, in the
Company's sole discretion, contribute to the 401-K Plan matching
contributions in an amount determined by the Company. Under the
401-K Plan the Company may choose not to make matching contribu-
tions. For an employee to be eligible to participate under the
401-K Plan, the employee must complete six months of service,
attain the age of 21 years and enter into a written salary
reduction agreement with the Company. An employee may not
contribute more than 15% of his annual compensation into the 401-K
Plan. If the Company, in its sole discretion, decides to make any
matching contribution in a particular year, such match will be
allocated only to employee participants who make a salary reduction
contribution to the 401-K Plan of at least 5% of their compensation
during the plan year based on a formula set forth in the 401-K
Plan. The employee participants' contributions to the 401-K Plan
are 100% vested when made, and any match made by the Company
becomes 100% vested when allocated. The employee participant may,
at his election, allocate his contribution and the contributions of
the Company among one or more of five (5) investment alternatives.
The Company did not make matching contributions to the 401-K Plan
during 1996. the Trustee for the 401-K Plan is Intrust Bank.
Compensation Pursuant to Stock Option Plans. The Company has
adopted an incentive stock option plan (the "Plan") in order to
attract, retain and motivate, and to encourage stock ownership by
key employees and officers of the Company and its subsidiaries. A
Stock Option Committee of the Board of Directors administers the
Plan and selects the officers and employees to whom options may be
granted and determines the number of shares to be governed by each.
None of the executive officers of the Company named in the above
Summary Compensation Table were granted options in 1996.
The total number of shares of Company common stock for which
options may be granted under the Plan shall be 400,000 shares, less
the number of shares subject to options outstanding as of
October 3, 1989, and granted on or after June 12, 1980, and prior
to October 3, 1989, under the stock option plan then in effect. In
the event that options granted under the Plan, or options
outstanding on October 3, 1989, under the predecessor to the Plan,
shall lapse without being exercised in whole or in part, other
options may be granted covering the shares not purchased under such
lapsed options. The aggregate fair market value of shares as of
the date of the grant with respect to which options are exercisable
for the first time may not exceed $100,000. The exercise price of
each option granted under the Plan may not be less than 100% of the
fair market value of the common stock on the date of the grant
(110% in the case of options granted to employees owning more than
10% of common stock of the Company). Each option granted under the
Plan will not be exercisable more than 5 years from the date the
option is granted.
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<PAGE>
In addition, the Company has adopted a stock option plan for
non-employee directors of the Company ("Non-Employee Director
Plan"). Under the Non-Employee Director Plan the Company may grant
options to non-employee directors of the Company to purchase up to
100,000 shares of the Company's common stock. The maximum
aggregate number of shares of Company common stock which may be
subject to options granted under the Non-Employee Director Plan to
any one non-employee director may not exceed 20,000 shares. Any
option granted under the Non-Employee Director Plan may not exceed
a term of five (5) years and the exercise price of such option may
not be less than the fair market value of the Company's common
stock on the date of the grant. Under the Non-Employee Director
Plan, a Stock Option Committee of the Board of Directors supervises
the administration of such plan and determines the number of shares
to be subject to each option granted under the Non-Employee
Director Plan. No options were granted under the Non-Employee
Director Plan in 1996.
Compensation of Directors. In 1996, the Company compensated
the non-employee directors of the Company in the amount of $500.00
for each meeting of the Board of Directors attended, and compen-
sated Mr. Anderson $1,000.00 per month for his services as Chairman
of the Board. Directors that also are employees of the Company or
its subsidiaries are not paid for serving as a director. The Board
of Directors held three (3) meetings during 1995.
Compensation Committee Interlocks and Insider Participation.
The compensation of all officers of the Company is set by the Board
of Directors. As noted, Carl B. Anderson, Jr. is both a director
and an officer of the Company.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<TABLE>
<CAPTION>
The following persons or entities are known to the Company to
be beneficial owners of more than 5% of the Company's common stock
as of April 15, 1997. Due to the requirements of the Securities
and Exchange Commission as to the method of determining the amount
of shares an individual or entity may beneficially own, the amounts
shown below for an individual or entity may also include shares
also considered beneficially owned by others.
Amount and Nature of Beneficial Ownership(1)
____________________________________________
Shared
Name and Sole Voting Voting
Title Address of and and Percent
of Beneficial Investment Investment of
Class Owner Owner Power Class
- ------ ----------------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Common Moorpark Holdings, 10,367,122(2) (2) 74.4%
Inc.
______________
-26-
<FN>
(1) Information with respect to beneficial ownership is based on
information furnished by the named entity or contained in
filings made with the Securities and Exchange Commission by
such entity.
(2) The Schedule 13D filed by this group shows Moorpark Holdings,
Inc., a Delaware corporation ("Moorpark"), owns of record and
has sole voting and dispositive power of the 10,367,122 shares
of Company common stock. However, the Schedule 13D further
notes that Moorpark is a wholly-owned subsidiary of
Continental Bank, National Association ("Continental Bank").
Continental Bank is a wholly-owned subsidiary of Bank of
America of Illinois. As a result, Bank of America of Illinois
may be considered to have voting and dispositive power over
the 10,367,122 shares owned of record by Moorpark. The
address of Moorpark Holdings, Inc. and Bank of America of
Illinois is 231 South LaSalle Street, Chicago, Illinois
60697.
</TABLE>
The Company has been advised that Moorpark may elect to seek
a buyer for its shares of Company common stock. If Moorpark were
to sell all or a substantial portion of its shares of common stock
of the Company, it would result in a change in control of the
Company.
<TABLE>
<CAPTION>
Security Ownership of Directors and Executive Officers. The
following table sets forth the number and percentage of the
outstanding shares of the Company's common stock beneficially owned
by each current director, each of the officers named in the
"Summary Compensation Table" and by all directors and officers as
a group as of April 9, 1996. Because of the requirements of the
Securities and Exchange Commission as to the method of determining
the amount of shares an individual or entity may beneficially own,
the amounts shown below for an individual or entity may include
shares also considered beneficially owned by others.
Amount and Nature
Name of of Amount
Individual Beneficial Ownership of Class(1)
------------------- -------------------- ----------
<S> <C> <C>
Carl B. Anderson, Jr.(2) 576,433 (2) 4.1%
James E. Brown(3) 196,815 (3) 1.4%
Jay T. Edwards(4) - *
Allen G. Poppino(5) 56,000 (5) *
Officers and directors 829,248(6) 6.0%
as a group (6 persons)
______________
-27-
<FN>
(1) Percent of Class is rounded to the nearest one-tenth. Any
shares which an individual has a right to acquire within sixty
(60) days after the record date are considered to be
outstanding for purposes of computing such individual's
percentage of shares beneficially owned and the percentage
ownership of officers and directors as a group. No percentage
(*) is indicated if less than one percent.
(2) Mr. Anderson's address is 1813 Southeast 25th Street, Oklahoma
City, Oklahoma 73128. The amount shown includes 571,433
shares for which Mr. Anderson has sole voting and investment
power and 1,000 shares owned by his wife.
(3) Mr. Brown's address is 4005 Northwest Expressway, Post Office
Box 24060, Oklahoma City, Oklahoma 73124. Mr. Brown shares
voting and investment power over 188,815 shares held by Santa
Fe Investment Company, which is wholly owned by Mr. Brown.
The amount shown includes 8,000 shares held by Mr. Brown as
custodian for his children.
(4) General Edwards' address is 2101 North Lincoln Boulevard, Room
311, Oklahoma City, Oklahoma 73105.
(5) Mr. Poppino's address is 9400 North Broadway, Post Office Box
20400, Oklahoma City, Oklahoma 73156-0400. Mr. Poppino has
sole voting and investment power over the shares noted as
beneficially owned by him.
(6) The amount shown includes 4,000 shares of common stock that
officers and directors of the Company have the right to
acquire within sixty (60) days.
</FN>
</TABLE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1996, Carl Anderson, Jr., CEO and acting
President, loaned the Company $195,000 bearing interest at 11% per
annum. The loan is payable upon demand and the interest is payable
monthly. The loan was for the Company's working capital purposes
and is secured by a mortgage on the Company's Oklahoma City
facility, which also serves as the Company's executive office. The
current outstanding balance on the loan is $172,000. If the
Proposed New Financing, as discussed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," is
completed, the lender will require Mr. Anderson to subordinate the
Company's indebtedness to him on terms acceptable to such lender.
In March, 1996, ETS, began leasing from Sullivan, a certain
number of hazardous waste tractors and trailers and has begun to
utilize such equipment to transport waste for Sullivan's and ETS'
customers. In connection with such lease, ETS is paying Sullivan
approximately $29,000 a month to lease from Sullivan such tractors
and trailers and a certain number of roll-off boxes. In connection
with the transaction with Sullivan, the Company has reached an
agreement in principle to acquire from Sullivan its customer list,
<PAGE>
goodwill, parts, supplies, and other business aspects of Sullivan's
hazardous waste transportation business. The Company and Sullivan
have agreed in principle that, in addition to the above-described
lease arrangement, the Company will pay Sullivan approximately 1.3
million shares of the Company's common stock. Additionally, the
Company has leased from Sullivan its transportation terminal in
Ponca City, Oklahoma, for a term of approximately four (4) years at
a rental of $3,800 per month. The Company and Sullivan are in the
process of finalizing a definitive agreement relating to the
purchase by the Company of Sullivan's customer list, goodwill,
parts, supplies and other business aspects of Sullivan's hazardous
waste transportation business. See Business -- General."
-29-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
<TABLE>
<CAPTION>
(a)(1) Financial Statements. The following consolidated
financial statements of the Company appear immediately following
this Part IV:
Pages
_____
<S> <C>
AMETECH, Inc.
Auditors' Report - 1996, 1995, and 1994............. 31
Consolidated Balance Sheets, December 31,
1996 and 1995..................................... 32
Consolidated Statements of Operations, Years ended
December 31, 1996, 1995, and 1994................. 34
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1996, 1995, and 1994.... 36
Consolidated Statements of Cash Flows, Years ended
December 31, 1996, 1995, and 1994................ 38
Notes to Consolidated Financial Statements.......... 40
</TABLE>
-30-
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
AMETECH, Inc.
We have audited the accompanying consolidated balance sheets of
AMETECH, Inc. (an Oklahoma corporation) and subsidiaries, as of
December 31, 1996 and 1995, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes 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
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of AMETECH, Inc. and subsidiaries, as of December 31, 1996
and 1995, and the consolidated results of their operations and
their consolidated cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 15 to the financial statements, the Company has experienced
recurring losses from operations, is in violation of debt
covenants, and is delinquent on certain debt payments. These
matters, among others, raise substantial doubt about the Company s
ability to continue as a going concern. Management s plan in regard
to these matters are also described in Note 15. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
In 1995, the Company changed its method of accounting for tires in
service.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Oklahoma City, Oklahoma
February 14, 1997
-31-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
_________________________
1996 1995
____________ ____________
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,000 $ 74,000
Certificate of deposit 222,000 -
Accounts receivable 4,074,000 3,538,000
Prepaid expenses 664,000 429,000
Other 227,000 646,000
__________ __________
Total Current Assets 5,197,000 4,687,000
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
of $9,044,000 and $9,742,000
at December 31, 1996 and 1995,
respectively 8,278,000 11,540,000
OTHER ASSETS, net of accumulated
amortization of $347,000 and
$325,000 at December 31, 1996
and 1995, respectively 346,000 499,000
__________ __________
$ 13,821,000 $16,726,000
============ ===========
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31,
_________________________
1996 1995
____________ ____________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 1,697,000 $ 2,053,000
Current maturities of long-term
obligations 7,306,000 2,126,000
____________ __________
Total Current Liabilities 9,003,000 4,179,000
____________ ___________
DEFERRED INCOME TAXES 641,000 1,365,000
____________ ___________
LONG-TERM OBLIGATIONS, net of current
maturities 393,000 6,242,000
____________ ___________
STOCKHOLDERS' EQUITY:
Common stock of $.01 par value;
13,932,121 and 13,874,206
shares issued at December 31,
1996 and 1995, respectively. 139,000 139,000
Additional paid-in capital 2,994,000 2,985,000
Retained earnings 760,000 1,925,000
___________ __________
3,893,000 5,049,000
Less - Treasury Stock (115,000 shares at
December 31, 1996 and 1995), at cost 109,000 109,000
___________ ___________
Total Stockholders' Equity 3,784,000 4,940,000
___________ ___________
$13,821,000 $16,726,000
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-33-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
____________________________________
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
REVENUES $18,112,000 $17,650,000 $14,945,000
___________ ____________ ___________
COSTS AND EXPENSES:
Operating costs 14,862,000 13,210,000 10,082,000
General and administrative
expense 2,124,000 2,530,000 2,285,000
Depreciation and
amortization 1,731,000 1,899,000 2,005,000
Interest expense 877,000 725,000 453,000
Other expense (income), net 403,000 (82,000) (33,000)
___________ ___________ ___________
19,997,000 18,282,000 14,792,000
___________ ___________ ___________
EARNINGS (LOSS) BEFORE
INCOME TAXES AND CUMU-
LATIVE EFFECT OF CHANGE
IN ACCOUNTING METHOD (1,885,000) (632,000) 153,000
____________ __________ __________
INCOME TAX EXPENSE (BENEFIT):
Current 4,000 (288,000) 68,000
Deferred (724,000) 150,000 5,000
____________ ___________ __________
(720,000) (138,000) 73,000
____________ ___________ __________
EARNINGS (LOSS)BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
METHOD (1,165,000) (494,000) 80,000
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING METHOD - 132,000 -
____________ __________ __________
NET EARNINGS (LOSS) $(1,165,000) $ (362,000) $ 80,000
============ ========== ==========
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
Years Ended December 31,
____________________________________
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
EARNINGS (LOSS) PER
COMMON SHARE:
Earnings (loss) before
cumulative effect of
change in accounting
method $ (0.08) $ (0.04) $ 0.01
Cumulative effect of
change in accounting
method - 0.01 -
___________ ___________ ___________
Earnings (loss)
per common share $ (0.08) $ (0.03) $ 0.01
=========== =========== ===========
Weighted average shares
outstanding 13,798,088 13,735,203 13,655,901
=========== =========== ===========
PRO FORMA AMOUNTS ASSUMING
RETROACTIVE APPLICATION OF
ACCOUNTING CHANGE
Earnings (loss) before
accounting change $ (494,000) $ 105,000
=========== ===========
Earnings (loss) per
share before
accounting change $ (0.04) $ 0.01
=========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-35-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Common Paid-in Retained
Stock Capital Earnings
__________ _________ _________
<S> <C> <C> <C>
Balance at January 1, 1994 $ 137,000 $2,949,000 $2,207,000
Net earnings - - 80,000
Sale of 76,662 shares of
common stock 1,000 21,000 -
_________ _________ _________
Balance at December 31, 1994 138,000 2,970,000 2,287,000
Net loss - - (362,000)
Sale of 67,824 shares of
common stock 1,000 15,000 -
_________ _________ __________
Balance at December 31, 1995 139,000 2,985,000 1,925,000
Net loss (1,165,000)
Sale of 57,915 shares of
common stock - 9,000 -
_________ _________ __________
$ 139,000 $ 2,994,000 $ 760,000
========= ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-36-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(CONTINUED)
Treasury
Stock Total
___________ __________
<S> <C> <C>
Balance at January 1, 1994 $ (109,000) $5,184,000
Net earnings - 80,000
Sale of 76,662 shares of
common stock - 22,000
___________ ___________
Balance at December 31, 1994 (109,000) 5,286,000
Net loss - (362,000)
Sale of 67,824 shares of
common stock - 16,000
___________ __________
Balance at December 31, 1995 (109,000) 4,940,000
Net loss (1,165,000)
Sale of 57,915 shares of
common stock - 9,000
___________ __________
$ (109,000) $3,784,000
============ ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-37-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
_____________________________________
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
Cash Flows From Operating
Activities:
Cash collected from $ 17,461,000 $ 17,670,000 $ 13,925,000
customers
Interest paid (877,000) (731,000) (447,000)
Interest received 38,000 60,000 94,000
Cash paid to employees and
other suppliers of goods
and services (17,343,000) (15,580,000) (12,373,000)
Income taxes refunded
(paid) 299,000 (101,000) 130,000
____________ ____________ ___________
Net Cash Provided by (Used
in) Operating Activities (422,000) 1,318,000 1,329,000
___________ ____________ __________
Cash Flows From Investing
Activities:
Additions to property and
equipment (349,000) (2,803,000) (3,172,000)
Proceeds from disposal of
equipment 1,706,000 212,000 174,000
Permit costs - - (20,000)
Purchase of businesses, net
of cash acquired - (1,626,000) -
Proceeds from sale of Academy
Computing Corporation - 18,000 7,000
Purchase of certificate of
deposit (222,000) - -
Payments received on notes
receivable 94,000 214,000 190,000
___________ ___________ ___________
Net Cash Provided By (Used
in) Investing Activities 1,229,000 (3,985,000) (2,821,000)
____________ ___________ ___________
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-38-
<PAGE>
<TABLE>
<CAPTION>
AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
Years Ended December 31,
_____________________________________
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
Cash Flows From Financing
Activities:
Proceeds of long-term debt $1,383,000 $ 4,065,000 $ 2,921,000
Payments on long-term debt (2,052,000) (1,993,000) (1,425,000)
Sale of unissued stock 9,000 16,000 22,000
Increase (Decrease) in bank
overdraft (211,000) 608,000 -
___________ ___________ ___________
Net Cash Provided by (Used in)
Financing Activities (871,000) 2,696,000 1,518,000
___________ ___________ ___________
Net Increase (Decrease) in
Cash and Cash Equivalents (64,000) 29,000 26,000
Cash and Cash Equivalents at
Beginning of Year 74,000 45,000 19,000
___________ ___________ ___________
Cash and Cash Equivalents
at End of Year $ 10,000 $ 74,000 $ 45,000
=========== =========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
During the year ended December 31, 1994, the Company acquired
property and equipment of $62,000 through trade accounts payable.
<TABLE>
<CAPTION>
The Company purchased two businesses in the year ended December 31,
1995. In conjunction with the acquisitions, liabilities were
assumed as follows:
<S> <C>
Assets acquired $ 2,053,000
Cash paid, net of cash acquired (1,626,000)
___________
Liabilities assumed $ 427,000
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-39-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF
OPERATIONS
AMETECH, Inc., an Oklahoma corporation, and its subsidiaries (the
Company) are engaged primarily in the transportation of hazardous
and non-hazardous waste on a nation-wide basis. The Company is a
majority owned subsidiary of Moorpark Holding, Inc., a Delaware
Corporation. The Company's accounting policies are described below.
Basis of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries, Environmental Transportation Services, Inc. (ETS),
Environmental Field Services, Inc. (EFS), BMH Materials, Inc.
(BMH), and Compliance Training Services, Inc. (CTS), after
elimination of significant intercompany transactions and balances.
Accounts Receivable - The Company provides allowances on specific
accounts based upon whether the Company reasonably believes that
collection of a specific account is questionable plus a general
allowance on uncollected balances based on the aging of accounts
receivable. If the Company reasonably believes that the collection
of a specific account, or a portion thereof, is questionable, after
examination of that account, then the Company will provide an
allowance on that portion on which it feels collection is
questionable. The Company provides a bad debt allowance each month
based on historically uncollectible amounts as adjusted for current
economic conditions. The allowance for estimated uncollectible
amounts was $48,000 and $79,000 at December 31, 1996 and 1995,
respectively. The Company grants credit to various customers,
primarily hazardous waste management companies and hazardous waste
brokers, under customary trade terms. To mitigate the risk of
credit loss, the Company performs a credit review of new customers
and establishes credit limits before extending credit.
Major Customers - At December 31, 1996, two customers accounted for
14% and 11% of the accounts receivable balance. During 1996, the
same customers accounted for 20% and 14% of the total revenue.
During 1995 and 1994, one customer accounted for 31% and 34%
respectively of total revenue.
-40-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF
OPERATIONS (Continued)
Property and Equipment - Depreciation of transportation and other
equipment is computed using the straight-line method over the
estimated useful lives of the respective assets, which range from
three to fifteen years.
Buildings are depreciated on the straight-line method over 30
years. Expenditures for repairs and maintenance are charged to
expense when incurred, whereas major betterments are capitalized.
Inventories - Supply inventory is priced at cost, not in excess of
market. Supplies are charged to expense when utilized for repair
or maintenance of equipment. Supply inventory of $190,000 and
$220,000 at December 31, 1996 and 1995, respectively, are included
in other current assets on the Consolidated Balance Sheets.
Income Taxes - The Company has adopted the liability method of
accounting for income taxes. Under the liability method, deferred
taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to
future years to differences between the carrying amounts and the
tax bases of existing assets and liabilities.
Earnings (Loss) Per Share - Earnings (Loss) per common share are
based upon the weighted average number of common shares and
dilutive common share equivalents outstanding during the respective
years.
Cash Equivalents - The Company considers all highly liquid
investments with original maturities of three months or less to be
cash equivalents.
Intangible Assets - Cost in excess of net assets of businesses
acquired is amortized on the straight line basis over a fifteen
year period. The Company assesses the recoverability of costs in
excess of net assets of businesses acquired by determining whether
the amortization of the asset balance over its remaining life can
be recovered through the undiscounted future operating cash flows
of the acquired operation. The amount of impairment, if any, is
based on projected discounted future operating cash flows. The
Company believes that no impairment has occurred and that no
reduction in the estimated useful life is warranted.
-41-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF
OPERATIONS (Continued)
Tires in Service - The cost of new and replacement tires is
capitalized and included in prepaid expenses and amortized on a
straight-line basis over the estimated useful life of the tires of
one to two years.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Reclassifications - Certain reclassifications have been made in the
consolidated financial statements for the year ended December 31,
1995 to conform with the current year presentation.
2. FINANCIAL INSTRUMENTS
The following table includes various estimated fair value
information as of December 31, 1996 and 1995 as required by
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Value of Financial Instruments". Such
information, which pertains to the Company's financial instruments,
is based on the requirements set forth in SFAS 107 and does not
purport to represent the aggregate net fair value of the Company.
The carrying amounts in the table are the amounts at which the
financial instruments are reported in the consolidated financial
statements.
All of the Company's financial instruments are held for purposes
other than trading. The following methods and assumptions were
used to estimate the fair value of each class of financial
instruments:
1. Cash and Cash Equivalents
The carrying amount approximates fair value because the Company has
the contractual right to immediate payment on the deposit accounts.
2. Certificate of Deposit
The carrying amount approximates fair value because of the short
maturity of this instrument.
-42-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. FINANCIAL INSTRUMENTS (continued)
3. Notes Receivable
The discounted amount of future cash flows using the rate that the
Company would expect to obtain on similar transactions is used to
estimate fair value.
4. Fixed Rate Long-Term Debt
The discounted amount of future cash flows using the Company's
current incremental rate of borrowing for similar liabilities is
used to estimate fair value. At December 31, 1996, certain debt
instruments are in default and it is not practicable to estimate
fair value.
5. Floating Rate Long-Term Debt
The carrying amount approximates fair value because interest rates
adjust to market rates for notes not in default. At December 31,
1996, certain debt instruments are in default and it is not
practicable to estimate fair value.
<TABLE>
<CAPTION>
The carrying amounts and estimated fair values of the Company's
financial instruments are as follows:
At December 31, 1996
_________________________
Carrying Estimated
Amount Fair Value
___________ __________
<S> <C> <C>
Financial Assets
Cash and cash equivalents $ 10,000 $ 10,000
Certificate of Deposit 222,000 222,000
Notes receivable 234,000 226,000
Financial Liabilities
Fixed rate long-term debt
Practicable to estimate
fair value (788,000) (794,000)
Not practicable (1,129,000) -
Floating rate long-term debt
Not practicable (5,782,000) -
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995
_________________________
Carrying Estimated
Amount Fair Value
_________ ____________
<S> <C> <C>
Financial Assets
Cash and cash equivalents $ 74,000 $ 74,000
-43-
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. FINANCIAL INSTRUMENTS (continued)
Notes receivable 328,000 319,000
Financial Liabilities
Fixed rate long-term debt (2,452,000) (2,548,000)
Floating rate long-term debt (5,916,000) (5,916,000)
</TABLE>
3. CHANGES IN ACCOUNTING PRINCIPLE AND ESTIMATE
The Company changed its method of accounting for replacement tires
effective January 1, 1995. The Company now capitalizes the cost
of replacement tires to more closely approximate their useful
lives. The capitalized cost of the tires is included in prepaid
expenses and is amortized over the estimated useful life of the
tires of one to two years.
Prior years were not restated and the cumulative effect of the
change is to decrease the net loss for 1995 by $132,000, net of
income taxes of $42,000, or $.01 per share. The pro forma amounts
on the statements of operations show the net earnings (loss) and
net earnings (loss) per share as if the new accounting method had
been in effect for the periods presented.
<TABLE>
<CAPTION>
Effective January 1, 1995, the Company changed the estimated useful
life for tractors from seven to ten years to more closely
approximate the useful lives of such assets. The effect of this
change was to decrease the net loss for 1995 by $319,000 ($.02 per
share), summarized as follows:
<S> <C>
Effect of life of tractors $ 408,000
Less: Tax effect of change 89,000
_________
Decrease in net loss $ 319,000
=========
</TABLE>
<TABLE>
<CAPTION>
Effective July 1, 1996, the Company elected to change the estimated
useful life for trailers from ten to fifteen years to more closely
approximate the useful life of such assets. The effect of this
change was to decrease the net loss for 1996 by $103,000 ($.01 per
share), summarized as follows:
<S> <C>
Effect of life of trailers $ 154,000
Less: Tax effect of change 51,000
_________
Decrease in net loss $ 103,000
=========
</TABLE>
-44-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DISPOSITION OF SUBSIDIARY
In January 1992, the Company sold its wholly owned subsidiary which
operated the "One-Call Business." The transaction was valued at
approximately $900,000 which included $200,000 in cash, a note
receivable for $485,000 payable in monthly installments over seven
years, 60,000 shares of the Company's common stock, and an
agreement requiring the purchaser to pay an additional $125,000 in
the future. The transaction resulted in an approximate gain of
$192,000 which is being recognized over the term of the note
(through February 1998). $32,000, $50,000 and $27,000 of such gain
was recognized in 1996, 1995 and 1994, respectively. The balance
of the note receivable and the additional amount due in the future
was $195,000 and $290,000 at December 31, 1996 and 1995,
respectively. The long-term portion of such amounts due at
December 31, 1995 ($197,000) is included in Other Assets on the
Consolidated Balance Sheet and the current portion of such amounts
is included in Accounts Receivable ($93,000). The amounts due were
collected in full in February, 1997 and are therefore included only
in Accounts Receivable at December 31, 1996.
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consist of the following:
December 31,
___________________________
1996 1995
____________ ____________
<S> <C> <C>
Transportation equipment $ 15,746,000 $ 18,336,000
Land and buildings 624,000 1,952,000
Furniture and fixtures 700,000 712,000
Other 252,000 282,000
____________ ____________
$ 17,322,000 $ 21,282,000
Less: Accumulated depreci-
ation and
amortization 9,044,000 9,742,000
____________ ___________
$ 8,278,000 $ 11,540,000
============ ===========
</TABLE>
-45-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
Long-term obligations consist of the following:
December 31,
_________________________
1996 1995
___________ ___________
<S> <C> <C>
Series of notes payable, collateralized
by transportation equipment, due in
monthly installments totaling $33,058
through November 11, 2000, including
interest at fixed rates between 8.50%
and 10% $ 1,129,000 $ 1,313,000
Series of notes payable, collateralized
by transportation equipment, due in
monthly installments through August 31,
2000, totaling $55,698 plus interest at
the London Interbank Offering Rate plus
4.60% (9.975% at December 31, 1996) 2,386,000 2,748,000
Note payable, collateralized by real
estate, due in monthly installments
of $5,354 through March 18, 1999,
including interest at 8.04% - 509,000
Note payable due in monthly install-
ments of $3,187 through February 21,
1996, including interest at 10%,
collateralized by real estate - 3,000
Note payable, collateralized by
transportation equipment, due in
monthly installments through
September 30, 1997, of $83,333 plus
interest at the London Interbank
Offering Rate plus 4.55% (9.925%
at December 31, 1996) 832,000 1,532,000
Series of notes payable, collateralized
by transportation equipment, due in
monthly installments totaling $6,622
through February 28, 1997, including
interest at 8.01% 7,000 83,000
</TABLE>
-46-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
6. LONG-TERM OBLIGATIONS (Continued)
<S> <C> <C>
Note payable, collateralized by trans-
portation equipment, due in monthly
installments through September 6, 1999,
of $5,164, including interest at 10.50% 148,000 191,000
Series of notes payable, collateral-
ized by equipment, due in monthly
installments totaling $664 through
May 10, 1997, including interest at
12.02% and 12.39% 3,000 10,000
Note payable collateralized by trans-
portation equipment, due in monthly
installments of $2,202 through
March 13, 2000, including interest
of prime plus 2.5% (11.50% at
December 31, 1996) 76,000 87,000
Note payable collateralized by trans-
portation equipment, due in monthly
installments of $8,189 through
April 10, 2000, including interest
at 9.50% 274,000 343,000
Note payable to bank under Credit
Agreement, collateralized by inven-
tories, receivable and contract
rights due April 30, 1996, with
monthly interest payments at the
national prime rate of interest
plus 3% (11.50% at December 31,
1995). - 1,549,000
Note payable under Credit Agreement,
collateralized by accounts receivable,
deposit accounts and certain tangible
assets due February 6, 1998, with
monthly interest payments at the
prime rate announced by The Chase
Manhattan Bank, N.A. plus 1.875%
(10.13% at December 31, 1996). 2,488,000 -
</TABLE>
-47-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
6. LONG-TERM OBLIGATIONS (Continued)
<S> <C> <C>
Note payable Shareholder, collat-
eralized by real estate, due on
demand or on February 1, 2001,
including interest at 11.00% 172,000 -
Capital lease obligation, collat-
eralized by equipment, payable in
monthly installments of $7,122
through December 31, 1999 172,000 -
Note payable, collateralized by
transportation equipment, due in
monthly installments, through
August 8, 1998, of $682, including
interest at 13.60% 12,000 -
___________ ___________
$ 7,699,000 $ 8,368,000
Less: Current maturities 7,306,000 2,126,000
___________ ___________
$ 393,000 $ 6,242,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996, the aggregate yearly maturities due on long-
term obligations are as follows:
Year Ending
December 31, Total
___________ ____________
<S> <C>
1997 $ 7,306,000
1998 229,000
1999 140,000
2000 24,000
___________
$ 7,699,000
===========
</TABLE>
In February 1996, the Company entered into a Credit Agreement which
replaced a previous agreement and provides for a $3,000,000 line of
credit for working capital purposes and letters of credit. The note
-48-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM OBLIGATIONS (Continued)
underlying this portion of this credit facility bears interest at
the prime rate announced by The Chase Manhattan Bank, N.A. plus
1.875% and is collateralized by accounts receivable, deposit
accounts and certain intangible assets. The interest on this note
is payable monthly, and principal payments are made as accounts
receivable are collected. The note is due February 6, 1998 and
there are no financial covenants associated with the Agreement. At
December 31, 1996, the Company was in default of certain Associates
Commercial Corporation ( ACC ) debt covenants regarding timely
annual financial reporting and current debt payments with other
creditors and the $2,488,000 balance outstanding has been
classified as current maturities of long-term obligations.
At December 31, 1996 the Company had a net bank overdraft of
$397,000. This overdraft was paid by the Company's line of credit
in January, 1997. This amount is included in Accounts Payable on
the Consolidated Balance Sheet.
Information regarding the Company's borrowings under the separate
Credit Agreements for 1996, 1995, and 1994 is as follows:
* Balance outstanding at December 31, 1996, 1995 and 1994 was
$2,488,000, $1,549,000, and $994,000, respectively.
* The weighted average interest rate during each year ended
December 31, 1996, 1995, and 1994 was 10.26%, 11.21%, and
8.58%, respectively.
* The maximum outstanding during 1996, 1995, and 1994 was
$3,089,000, $1,784,000, and $1,095,000, respectively.
* The average amount outstanding for 1996, 1995, and 1994 was
$2,462,000, $944,000, and $666,000, respectively.
* The weighted average interest rate at December 31, 1996,
1995, and 1994 was 10.13%, 11.50%, and 10.50%,
respectively.
The Company s transportation subsidiary has an equipment lending
arrangement with ACC under which the Company owed approximately
$1,205,000 at December 31, 1996. The Company was unable to make
its scheduled payments for September, October, and November 1996;
however, ACC agreed to defer these three months' principal payments
to the end of the respective notes. At December 31, 1996, the
Company was in default of certain ACC debt covenants regarding
timely annual financial reporting and current debt payments with
other creditors, and the $1,205,000 balance outstanding has been
classified as current maturities of long-term obligations.
-49-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM OBLIGATIONS (Continued)
The Company s transportation subsidiary has another equipment
financing arrangement with The CIT/Equipment Financing Group, Inc.
( CIT ). As of December 31, 1996, the principal amount owing to
CIT for the purchase of transportation equipment is $3,218,000. The
Company has been unable to make its regular monthly principal
payments since August 1996, and as a result, the Company received
a letter dated October 28, 1996 from CIT stating that the Company
was in default for the past due principal payments in the amount of
$351,638.46 and that this amount must be paid by October 31, 1996.
The Company has been negotiating with CIT regarding possible cure
of its default on the equipment loans; however, the Company and CIT
have not reached a formal agreement. The Company continues to pay
monthly interest payments as well as principal payments when the
Company is able. Additionally, the Company has liquidated certain
transportation equipment that secured CIT s loans and has used the
proceeds to reduce the outstanding balance of such loans. As a
result of the default with CIT, the Company has reclassified
approximately $1,799,000 from long-term obligations to current
maturities of long-term obligations.
In the event the Company cannot reach an acceptable agreement with
CIT to cure the Company s default, the Company does not have
sufficient liquidity or available resources which would enable it
to immediately repay the debt to CIT, and therefore, should such
agreement with CIT not be reached, the Company would need to be
granted time by CIT to sell certain assets that secure the CIT loan
in a manner in which such sale would not be detrimental to the
Company or seek external sources of financing to make repayment to
CIT; or if no resolution can be reached with CIT or if the Company
is unable to obtain financing to repay CIT, the Company would have
to consider taking steps necessary to protect itself from actions
that CIT could take against the Company, such as requesting the
appropriate court to protect the Company from its creditors.
The Company is searching for a new equipment lender to replace CIT
and has received a proposal letter from a lender which lender would
replace all equipment loans as well as the Company s working
capital line of credit. This proposed loan has been approved by
the lender s credit committee; however, closing of the proposed
loan is still subject to further due diligence being conducted by
such lender to its satisfaction, a determination by such lender
that the Company has collateral in an amount satisfactory to such
lender, and to the finalization of definitive loan documents.
-50-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK OPTIONS
Under the Company's stock option plan, options to purchase up to
400,000 common shares may be granted for exercise through 1999.
The options are exercisable in whole or in part in equal annual
installments and to the extent not exercised, accumulate, provided
all options must be exercised prior to the expiration date which is
five years after the execution date of the individual stock option
agreements. The Company has also established a non-qualified stock
option plan for outside members of the Board of Directors. This
plan has 100,000 shares of common stock available and the term of
the plan runs to 1999. No options under the non-qualified plan
have been granted.
On February 21, 1991, options for the purchase of 175,000 shares of
common stock were granted to certain key employees of the Company
at a price of $.50 per share. These options become exercisable in
equal installments between the first anniversary date and the
expiration date of the options (February 21, 1996). Options for
170,000 shares have been canceled due to employees' terminations
and expiration of the vesting period and options for 5,000 shares
were exercised in August 1992. At December 31, 1996, there were no
options outstanding.
Options for 141,500 shares of common stock were granted to certain
employees at an exercise price of $.46 per share. These options
were granted on May 3, 1994 and become exercisable in equal
installments between the first anniversary date and the expiration
date of the options (May 3, 1999). Options for 97,500 shares have
been canceled due to employee terminations. At December 31, 1996,
options for 20,000 shares are exercisable at $.46 per share.
The Company is required to keep a sufficient number of shares
available to meet the requirements of the option agreement in the
form of either treasury stock or authorized and unissued stock.
As of December 31, 1993, 132,500 total shares were outstanding at
a weighted average exercise price of $.93. The total shares
canceled during 1994 had a weighted average exercise price of $.85.
The option activity from December 31, 1994 to December 31, 1996 was
all at a weighted average exercise price of $.46.
-51-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>
A summary of transactions of the incentive stock option plan is as
follows:
Number of Shares
___________________________
1996 1995 1994
_______ _______ _______
<S> <C> <C> <C>
Outstanding at beginning of year 55,500 111,500 132,500
Granted - - 141,500
Exercised - - -
Canceled 11,500 56,000 162,500
_______ ________ _______
Outstanding at end of year 44,000 55,500 111,500
======= ======== =======
</TABLE>
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation", which encourages
companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company elected to continue
to value stock options using the method as prescribed by APB
Opinion No. 25, "Accounting For Stock Issued to Employees". The
Company granted no options during 1996 or 1995; and, therefore, pro
forma disclosures of compensation costs, as outlined in SFAS 123,
are not required.
8. INCOME TAX EXPENSE (BENEFIT)
<TABLE>
<CAPTION>
Tax expense (benefit) consists of the following:
Years Ended December 31,
_______________________________
1996 1995 1994
__________ ________ _________
<S> <C> <C> <C>
Current Expense (Benefit)
Federal $ 13,000 $(191,000) $ 41,000
State (9,000) (55,000) 27,000
__________ ________ ________
Total Current 4,000 (246,000) 68,000
</TABLE>
-52-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
8. INCOME TAX EXPENSE (BENEFIT) (Continued)
<S> <C> <C> <C>
Deferred Expense (Benefit)
Federal (615,000) 69,000 21,000
State (109,000) 81,000 (16,000)
__________ ________ ________
Total Deferred (724,000) 150,000 5,000
__________ ________ ________
Total $(720,000) $(96,000) $ 73,000
========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
The income tax provision reconciled to the tax computed at the
statutory Federal rate was:
Years Ended December 31,
______________________________
1996 1995 1994
__________ ________ _________
<S> <C> <C> <C>
Tax expense (benefit) at
statutory rate $(641,000) $(155,000) $ 52,000
State income taxes (98,000) 25,000 11,000
Other (18,000) (19,000) -
Non-deductible items 1,000 11,000 10,000
Graduated rate differential - 42,000 -
_________ ________ ________
$(720,000) $ (96,000) $ 73,000
========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
Amounts of deferred tax assets and deferred tax liabilities at
December 31, 1996 and December 31, 1995 are as follows:
December 31,
___________________
1996 1995
_________ ________
<S> <C> <C>
Deferred Tax Assets
Alternative minimum tax
credit carryforward $ 105,000 $ 61,000
Net operating loss
carryforward 743,000 -
Accrued liabilities 9,000 21,000
Allowance for doubtful
accounts 20,000 34,000
</TABLE>
-53-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
8. INCOME TAX EXPENSE (BENEFIT) (Continued)
<S> <C> <C>
Accrued items not currently
deductible for tax 16,000 79,000
_________ _________
Deferred tax assets 893,000 195,000
Deferred Tax Liabilities
Excess financial accounting
basis over tax basis
of fixed assets (1,534,000) (1,560,000)
___________ __________
Net deferred tax liabilities $ (641,000) $(1,365,000)
=========== ===========
</TABLE>
At December 31, 1996 the Company has income tax refunds of $9,000
for taxes paid in prior years, resulting from the net operating
loss carryback provisions of the Internal Revenue code. These
amounts are included in Other Current Assets on the Consolidated
Balance Sheet. The Company has net operating loss carryforwards of
approximately $1,855,000 which can be used to offset future taxable
income and will expire in 2011.
9. RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
The reconciliation of net earnings (loss) to net cash provided by
(used in) operating activities for the years ended December 31,
1996, 1995, and 1994, is as follows:
Years Ended December 31,
_______________________________
1996 1995 1994
__________ ________ ________
<S> <C> <C> <C>
Net Earnings (Loss) $(1,165,000) $(362,000) $ 80,000
Adjustments to reconcile
net earnings (loss)to net
cash provided by (used
in) operating activities:
</TABLE>
-54-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
9. RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES (Continued)
<S> <C> <C> <C>
Depreciation and
amortization 1,731,000 1,899,000 2,005,000
(Gain)loss on sale
of property 224,000 (3,000) (96,000)
Gain on sale
of subsidiaries (32,000) (50,000) (34,000)
Write-off of uncollectible
accounts 159,000 41,000 38,000
Change in assets and
liabilities, net of
effects of purchases
of businesses:
(Increase) decrease in
accounts receivable (651,000) 20,000 (1,003,000)
(Increase) decrease in
prepaid expenses (235,000) (250,000) 73,000
(Increase) decrease in
other current assets 419,000 (393,000) 61,000
Increase (decrease) in
accounts payable and
accrued liabilities (145,000) 266,000 196,000
Deferred income taxes (724,000) 150,000 5,000
Other (3,000) - 4,000
__________ __________ __________
$ (422,000) $1,318,000 $1,329,000
========== =========== ==========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company had outstanding letters of credit
of $216,000. The letters of credit serve as security to obtain
licenses in certain states for uninsured workman's compensation
deposits and for performance of services. A certificate of deposit
in the amount of $222,000, including interest, has been pledged as
collateral for the letters of credit. Such letters of credit
reduce the amounts which can be drawn under the Company's
$3,000,000 line of credit (Note 6).
The Company is partially uninsured on its workers' compensation
insurance for Oklahoma employees. The Company s retention under
this plan is $500,000, after which coverage under the excess
-55-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS AND CONTINGENCIES (Continued)
workers' compensation insurance plan becomes effective. The
Company accrues estimated losses monthly based on a review of
claims filed and claims incurred but not reported. The claim
expense incurred under the partially uninsured workers'
compensation plan was $118,000, $133,000 and $58,000 for 1996, 1995
and 1994, respectively.
The Company is also partially uninsured for its employee group
health insurance coverage. Under this program, the Company is
liable for up to of $35,000 per covered person per year with an
aggregate liability not to exceed $450,000 per year for the total
group. The excess insurance coverage becomes effective when the
aforementioned limits are reached. The Company accrues estimated
losses monthly based on a review of claims filed and claims
incurred but not reported. The claim and premium expense incurred
under the Company's partially uninsured group health insurance plan
was $285,000, $233,000 and $250,000 for 1996, 1995 and 1994,
respectively.
<TABLE>
<CAPTION>
The Company leases transportation terminals, office space and
transportation equipment under operating lease arrangements. The
following is a schedule by year of future minimum lease payments
under these operating leases.
Year Ending
December 31, Total
___________ ___________
<S> <C>
1997 $485,000
1998 456,000
1999 451,000
2000 92,000
2001 10,000
_________
$1,494,000
=========
</TABLE>
Total lease expense for the years ended December 31, 1996, 1995,
and 1994 was approximately $538,000, $135,000, and $113,000,
respectively.
The Company provides an employee savings plan ("401-K Plan") for
its employees. The 401-K Plan provides for employee contributions,
and further provides the Company may, at its discretion, make a
matching contribution to the 401-K Plan in an amount determined by
the Company. If the Company decides to make
-56-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS AND CONTINGENCIES (Continued)
any matching contribution, such match will be allocated only to
employee participants who make a salary reduction contribution of
at least 5% of their compensation. Under the Company's Plan, up to
10% of the fair market value of the Plan's assets may be used to
purchase company stock. The Plan purchased 57,915, 67,824, and
76,662, shares for $9,000, $16,000, and $22,000 in 1996, 1995, and
1994, respectively. There was no Company contribution to the 401-K
Plan for 1996, 1995, or 1994.
The Company has employment agreements with certain of its key
employees which provide for salary continuation for a specified
number of months upon a change of control of the Company. In
addition, certain stock options to those employees immediately vest
upon a change of control.
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,
were negligent 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
case is in its early stages and involves facts yet unknown to the
Company. The Company believes that ETS has valid defenses to the
plaintiffs' claims, and while the ultimate resolution is unknown,
management believes the final outcome will not have a material
adverse impact on the Company's financial position or results of
operations.
-57-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS AND CONTINGENCIES (Continued)
The Texas Workers' Compensation Fund has requested additional
workers' compensation premiums totaling $69,000 based upon salaries
of drivers carried under the Oklahoma self-insurance policy. The
Company believes the drivers are not Texas employees because they
were interstate drivers hired and controlled through the Oklahoma
office. Although the ultimate impact of this matter is unknown,
the Company does not believe the final outcome will have a material
adverse impact on the Company's financial position or results of
operations.
The Company, among other defendants, has been sued by parties
alleging that the Company's transporting of certain hazardous waste
materials to a waste disposal well in Smith County, Texas, was
negligent in not ensuring the owner properly operated the disposal
facility. The lawsuit alleges joint and several liability for all
defendants for actual and punitive damages of an unspecified
amount. This matter is in the early stages and discovery has not
commenced. However, the Company intends to vigorously defend
itself and, although the ultimate outcome is unknown, the Company
believes the final resolution will not have a material adverse
impact on the Company's financial position or results of
operations.
The Company is involved in various other legal actions arising in
the normal course of business. After taking into consideration
available insurance coverage, legal counsel s evaluation of such
actions, and other relevant information, management is of the
opinion that their outcome will not have a significant effect on
the Company s consolidated financial position or results of
operations.
11. RELATED PARTY TRANSACTIONS
During 1995 and 1994, the Company purchased certain fixed assets
totaling approximately $147,000, and $187,000, respectively from a
company partially owned by a director and officer of the Company.
In February 1996, an officer and director loaned the Company
$195,000 bearing interest at 11% per annum. The principal balance
of the loan is payable on demand, but no later than February 1,
2001, with interest payable monthly. The loan was for working
capital purposes and is secured by a mortgage on the Company s
property in Oklahoma City, Oklahoma. The outstanding balance on
this loan at December 31, 1996 was $172,000.
-58-
AMETECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. ACQUISITION OF ASSETS OF SMITH SYSTEMS TRANSPORTATION, INC.
In June 1996, the Company began renting two roll-off trailers from
an officer and director of the Company for a total of $3,300 per
month. The Company paid $23,100 in rental charges in 1996.
Effective July 20, 1995, the Company purchased from Smith Systems
Transportation, Inc. ("SST"), certain of SST's transportation-
related assets, which consisted primarily of assets comprising the
hazardous waste transportation activities of SST, for approximately
$519,000. Pursuant to the agreement between the Company and SST,
the Company is to also pay to SST an amount equal to 4% of net
revenues collected and received by ETS from certain of SST's
existing customers at time of closing, with certain limited
exceptions, during the period of the first three years from the
date of the agreement. In the purchase transaction, the Company
did not assume any of the liabilities of SST and the operations of
the acquisition have been included since July 20, 1995. Such
operations do not constitute a significant business acquisition and
pro forma results are not presented.
-59-
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. ACQUISITION OF DWIGHT TRUCKING, INC.
Effective July 1, 1995, the Company acquired a waste transporter,
Dwight Trucking, Inc. ("Dwight"), located in Bakersfield,
California. The purchase price was approximately $1,204,000 and has
been accounted for as a purchase transaction. As a result the
Company has allocated the total cost of the acquisition to the
acquired assets and assumed liabilities, based on their relative
fair values. The results of operations of Dwight have been
included in the Company s consolidated financial statements since
July 1, 1995. Cost in excess of the net assets acquired was
approximately $323,000 and the net unamortized value of $292,000 is
included in other assets at December 31, 1996.
In addition, the Company leased from the sellers of the Dwight
stock a transportation terminal located in Bakersfield, California,
utilized by Dwight, for a period of five years, at a rental of
$2,900 per month, with an option to extend for another five-year
term at a rental of $2,900 per month adjusted for cumulative
increase in the consumer price index for the Southern California
Region from commencement of the initial five-year lease term.
<TABLE>
<CAPTION>
The following summarized pro forma unaudited information assumes
the acquisition had occurred on January 1, 1994:
Years Ended December 31,
1995 1994
___________ ____________
<S> <C> <C>
Revenues $ 18,604,000 $ 16,883,000
=========== ============
Net earnings (loss) before
cumulative effect of change
in accounting method (508,000) 9,000
=========== ============
Net earnings (loss) (376,000) 9,000
=========== ============
Earnings (loss) per share
before cumulative effect of
change in accounting method $ (0.04) $ 0.00
=========== ============
Earnings (loss) per share $ (0.03) $ 0.00
=========== ============
</TABLE>
-60
<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SUBSEQUENT EVENT
The Company has reached an agreement in principle to acquire from
Sullivan Trucking Company, a hazardous waste transporter, certain
customer lists, goodwill, inventory, and other business aspects.
Upon closing of this transaction, the Company will give Sullivan
1,309,221 shares of the Company s common stock.
15. REALIZATION OF ASSETS
The Company has experienced recurring operating losses, with a loss
of $1,165,000 occurring in 1996. The Company is in violation of
its debt covenants and became delinquent on certain debt payments
(NOTE 6) which constitute conditions of default and make the
balance currently due and payable.
The Company's ability to continue as a going concern is contingent
upon its ability to maintain adequate financing and attain
profitable operations. The financial statements do not include any
adjustments relating to the recoverability or classification of
asset amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a
going concern. Although management of the Company believes it may
obtain additional financing, there is no assurance that the company
will be able to achieve or maintain profitability.
-61-
<PAGE>
(a)(3) Exhibits. The Company files the following exhibits
with this report:
3(i). Amended Articles of Incorporation of the Company,
together with Certificate of Merger, was filed as Exhibit 2(b) to
the Company's Form 8-K, Date of Report (date of earliest event
reported): January 9, 1991, and is incorporated herein by
reference.
3(ii). Bylaws, as amended, of the Company, which have been
previously filed as Exhibit 2(c) to the Company's Form 8-A
Registration Statement No. 000-19009, and is incorporated herein by
reference.
4. Specimen copy of the Company's common stock certificate,
which has been previously filed as Exhibit 1 to the Company's Form
8-A Registration Statement No. 000-19009, and is incorporated
herein by reference.
10(a). Company Stock Option Plan (Employee), which has been
filed as Exhibit 10(a) to the Company's Form 10-K for the year
ended December 31, 1990, and is hereby incorporated by reference.
10(b). Specimen copy of Option Agreement (Employees), which
has been filed as Exhibit 10(b) to the Company's Form 10-K for the
year ended December 31, 1990, and is hereby incorporated by
reference.
10(c). Company Stock Option Plan (Non-Employee Directors),
which has been filed as Exhibit 10(c) to the Company's Form 10-K
for the year ended December 31, 1990, and is hereby incorporated by
reference.
10(d). Specimen copy of Option Agreement (Non-Employee
Directors), which has been filed as Exhibit 10(d) to the Company's
Form 10-K for the year ended December 31, 1990, and is hereby
incorporated by reference.
10(e). Non-Competition Agreement, dated December 2, 1992,
between the Company and Laidlaw Transportation, Inc., which has
been filed as Exhibit 2.3 to the Company's 8-K dated December 2,
1992, and is incorporated herein by reference.
10(f). Loan and Security Agreement, dated August 27, 1993,
between the CIT Group/Equipment Financing, Inc. and Environmental
Transportation Services, Inc., which has been filed as Exhibit
10(i) to the Company's Form 10-K for the year ended December 31,
1993, and is hereby incorporated by reference.
-62-
<PAGE>
10(g). First Amendment to Loan and Security Agreement dated
March 22, 1994, between the CIT Group/Equipment Financing, Inc. and
Environmental Transportation Services, Inc. has been filed as
Exhibit 10(k) to the Company's Form 10-K for the year ended
December 31, 1994, and is hereby incorporated by reference.
10(h). Second Amendment to Loan and Security Agreement dated
September 22, 1994, between the CIT Group/Equipment Financing, Inc.
and Environmental Transportation Services, Inc. has been filed as
Exhibit 10(l) to the Company's Form 10-K for the year ended
December 31, 1994, and is hereby incorporated by reference.
10(i). Third Amendment to Loan and Security Agreement dated
March 7, 1995, between the CIT Group/Equipment Financing, Inc. and
Environmental Transportation Services, Inc. has been filed as
Exhibit 10(m) to the Company's Form 10-K for the year ended
December 31, 1994, and is hereby incorporated by reference.
10(j). Guaranty Agreement dated August 27, 1993, between the
CIT Group/Equipment financing, Inc. and AMETECH, Inc., which has
been filed as Exhibit 10(j) to the Company's Form 10-K for the year
ended December 31, 1993, and is hereby incorporated by reference.
10(k). Promissory note between the CIT Group/Equipment
Financing, Inc. and Environmental Transportation Services, Inc.,
which has been filed as Exhibit 10(l) to the Company's Form 10-K
for the year ended December 31, 1993, and is hereby incorporated by
reference.
10(l). Promissory note dated May 16, 1994, between the CIT
Group/Equipment Financing, Inc. and Environmental Transportation
Services, Inc. has been filed as Exhibit 10(o) to the Company's
Form 10-K for the year ended December 31, 1994, and is hereby
incorporated by reference. Substantially the same agreements have
been entered into by Environmental Transportation Services, Inc.
with the CIT Group/Equipment Financing, Inc. for the purpose of
financing other transportation equipment. Such omitted documents
will be filed with the Commission upon the Commission's request.
10(m). First Amendment to Promissory Note to CIT Group/
Equipment Financing, Inc., which has been filed as Exhibit 4.4 to
the Company's Form 10-Q for the quarter ended June 30, 1996, and is
incorporated herein by reference.
10(n). Note and Security Agreement between NationsBanc Leasing
Corporation and Environmental Transportation Services, Inc., dated
December 17, 1992, which has been filed as Exhibit 10(m) to the
Company's Form 10-K for the year ended December 31, 1993, and is
hereby incorporated by reference.
-63-
<PAGE>
10(o). Agreement between Associates Commercial Corporation and
Environmental Transportation Services, Inc. dated July 20, 1994,
has been filed as Exhibit 10(s) to the Company's Form 10-K for the
year ended December 31, 1994, and is hereby incorporated by
reference. Substantially the same agreements have been entered into
by Environmental Transportation Services, Inc. with Associates
Commercial Corporation for the purpose of financing other
transportation equipment. Such omitted documents will be filed
with the Commission upon the Commission's request.
10(p). Security Agreement between Associates Commercial
Corporation and Environmental Transportation Services, Inc. dated
July 20, 1994, has been filed as Exhibit 10(r) to the Company's
Form 10-K for the year ended December 31, 1994, and is hereby
incorporated by reference. Substantially the same agreements have
been entered into by Environmental Transportation Services, Inc.
with Associates Commercial Corporation for the purpose of financing
other transportation equipment. Such omitted documents will be
filed with the Commission upon the Commission's request.
10(q). Continuing Guaranty between AMETECH, Inc. and
Associates Commercial Corporation dated July 20, 1994, has been
filed as Exhibit 10(t) to the Company's Form 10-K for the year
ended December 31, 1994, and is hereby incorporated by reference.
Substantially the same agreements have been entered into by
AMETECH, Inc. with Associates Commercial Corporation for the
purpose of financing other transportation equipment. Such omitted
documents will be filed with the Commission upon the Commission's
request.
10(r). Change in Terms Agreement between First Interstate Bank
of Texas, N.A. and Environmental Transportation Services, Inc.,
dated March 25, 1994, has been filed as Exhibit 10(u) to the
Company's Form 10-K for the year ended December 31, 1994, and is
hereby incorporated by reference.
10(s). Transportation Accounts Financing and Security
Agreement, dated February 6, 1996, between Associates Commercial
Corporation and Environmental Transportation Services, Inc., filed
as Exhibit 10(r) to the Company's Form 10-K for the year ended
December 31, 1995, and is hereby incorporated by reference.
10(t). Equipment Lease Agreement between Environmental
Transportation Services, Inc. and Sullivan's Trucking Co., Inc.,
dated March 1, 1996, has been filed as Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended March 31, 1996, and is
incorporated herein by reference.
10(u). Equipment Lease Agreement between Environmental
Transportation Services, Inc. and Sullivan's Trucking Co., Inc.,
dated March 1, 1996, has been filed as Exhibit 10.2 to the
-64-
<PAGE>
Company's Form 10-Q for the quarter ended March 31, 1996, and is
incorporated herein by reference.
10(v). Letter from Associates TransCapital Services to
Environmental Transportation Services, Inc., dated June 6, 1996,
which has been filed as Exhibit 4.1 to the Company's Form 10-Q for
the quarter ended June 30, 1996, and is incorporated herein by
reference.
10(w). Letter from Associates TransCapital Services to
Environmental Transportation Services, Inc., dated December 5,
1996, which was filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended September 30, 1996, and is incorporated
herein by reference.
10(x). Fifth Affirmation, Extension and Amendment of Guaranty
from the Company to CIT Group/Equipment Financing, Inc., which has
been filed as Exhibit 4.3 to the Company's Form 10-Q for the
quarter ended June 30, 1996, and is incorporated herein by
reference.
10(y). Letter from CIT Group to the Company, dated August 16,
1996, which was filed as Exhibit 4.5 to the Company's Form 10-Q for
the quarter ended June 30, 1996, and is incorporated herein by
reference.
21. Subsidiaries of the Company.
23. Consent of Experts.
27. Financial Data Schedule
99. Letter from Congress Financial Corporation (Southwest) to
the Company
(b) Reports on Form 8-K. The Company did not file any
reports on Form 8-K during the last quarter of the year ended
December 31, 1996.
-65-
<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 this 24th day of June, 1997.
AMETECH, Inc.
By: /s/ Carl B. Anderson, Jr.
_____________________________
Carl B. Anderson, Jr.
President
(Chief Executive Officer)
By: /s/ Kerry Willingham
_____________________________
Kerry Willingham
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the undersigned has signed this report on behalf
of the Company, in the capacities and on the dates indicated:
Dated: June 24, 1997 By: /s/ Carl B. Anderson, Jr.
_____________________________________
Carl B. Anderson, Jr.
Chairman of the Board
Dated: June 24, 1997 By: /s/ James E. Brown
_____________________________________
James E. Brown, Director
Dated: June 24, 1997 By: /s/ Jay Edwards
_____________________________________
Jay Edwards, Director
Dated: June 24, 1997 By: /s/ Allen G. Poppino
_____________________________________
Allen G. Poppino, Director
BALL:\A-C\AMETECH\10K\1996\10K.96
SUBSIDIARIES OF THE COMPANY
___________________________
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
__________________ ______________________
<S> <C>
Environmental Transportation Oklahoma
Services, Inc.
Environmental Field Services, Inc. Oklahoma
BMH Materials, Inc. Texas
Compliance Training Services, Inc. Tennessee
(formerly E.T.S. Drivers, Inc.)
BALL:\A-C\AMETECH\10K\1996\SUB.LST
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 14, 1997, accompanying the
consolidated financial statements of AMETECH, Inc. and subsidiaries
included in the Annual Report on Form 10-K for the year ended
December 31, 1996, which are incorporated by reference in the
Registration Statement on Form S-8. We consent to the incorporation
by reference in the Registration Statement of the aforementioned
report.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Oklahoma City, Oklahoma
February 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $ 10,000
<SECURITIES> 22,000
<RECEIVABLES> 4,074,000
<ALLOWANCES> 0
<INVENTORY> 190,000
<CURRENT-ASSETS> 5,197,000
<PP&E> 17,322,000
<DEPRECIATION> 9,044,000
<TOTAL-ASSETS> 13,821,000
<CURRENT-LIABILITIES> 9,003,000
<BONDS> 393,000
0
0
<COMMON> 139,000
<OTHER-SE> 3,645,000
<TOTAL-LIABILITY-AND-EQUITY> 13,821,000
<SALES> 0
<TOTAL-REVENUES> 18,112,000
<CGS> 0
<TOTAL-COSTS> 16,985,000
<OTHER-EXPENSES> 2,134,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 877,000
<INCOME-PRETAX> (1,885,000)
<INCOME-TAX> (720,000)
<INCOME-CONTINUING> (1,165,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,165,000)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
Congress Financial Corporation
1201 Main Street Suite 1625
Post Office Box 50728
Dallas, Texas 75250
214 761 9044 Fax 214 748 9118
May 20, 1997
Congress Financial
Ametech, Inc.
1813 S.E. 25th Street
Oklahoma City, OK 73129
Attention: Mr. Kerry Willingham
Vice President
Dear Mr. Willingham:
Pursuant to our conversation, we wanted to confirm to you that
the credit committee of Congress has approved the proposed financing
by Congress of Ametech, Inc. and Environmental Transportation
Services, Inc., as contemplated by our proposal letter to you dated
February 5, 1997, subject to the various terms and conditions
outlined in the proposed letter and as required by our credit
committee in connection with its approval.
As stated in the proposal letter, the proposed financing will
need to close within forty-five (45) days of the date of our credit
committee's approval. In view of this requirement and based on our
conversations, we would like to suggest that we set June 24, 1997,
as our intended closing date. Obviously, our ability to achieve
this goal will depend on, among other things, whether all condition
to the financing are completed by such date. We hope that you will
be able to provide the necessary information and materials to enable
us to satisfy the conditions to financing within such time frame.
In order to be in a position to close, we will need, among
other things, to be able to determine to our satisfaction the amount
of the loans available to the company pursuant to the lending
formulas and applicable eligibility criteria. To enable us to
determine the amount of the loans available to the company at
closing, we will need as a condition of closing to have received all
necessary collateral information and reporting in a form and manner
satisfactory to us, including current agings of receivables, current
perpetual inventory records and/or roll-forwards of accounts and
inventory through the date of closing, together with such supporting
documentation as may be necessary or appropriate, and other
documents and information that will enable us to accurately identify
and verify the eligible collateral at or before closing. Without
limiting any of the other conditions of closing, please indicate
<PAGE>
your acknowledgment and agreement that our receipt of such
information in a form satisfactory to us is a condition of the
closing of our financing arrangements by signing in the space
provided below.
We would plan to have our field examiners visit your offices
to review your records and the proposed collateral with you on or
about June 16, 1997. We will be in contact with you to confirm the
specific dates and times for such visit. If such time period will
be a problem for you, please be sure to let us know.
Please note that nothing in this letter should be construed as
a commitment by us to lend. As set forth in our proposal letter,
such a commitment letter from us which expressly so states. This
is not a commitment letter.
We look forward to continuing to work with you and your
colleagues.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
/s/ Gill Elmore
Gill Elmore
Vice President
ACKNOWLEDGED AND AGREED:
Ametech, Inc.
Environmental Transportation Services, Inc.
By: /s/ Kerry Willingham
__________________________
Title: CFO
__________________________
