<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NUMBER 0-14881
WASTE RECOVERY, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-1833498
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
309 S. PEARL EXPRESSWAY, DALLAS, TX 75201
(Address of Principal Executive Offices) (Zip Code)
(214) 741-3865
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------------------- ----------------------------------------------
<S> <C>
NONE N/A
</TABLE>
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK (NO PAR VALUE)
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. / /
Approximate aggregate market value of voting stock held by non-affiliates
of the Registrant (based on average closing bid and asked price of March 27,
1995) $3,320,556.
Shares Outstanding at March 27, 1995 7,149,509
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE> 2
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for
the fiscal year ended December 31, 1994:
Waste Recovery, Inc. is amending its Form 10-K/A (December 31, 1994) as
Amendment No. 2. Attached are the applicable portions of the 10-K that are
being amended. These amendments result from changes made during the filing of
an S-1 for Waste Recovery, Inc. (May 23, 1995), and the comments we had
received from the SEC leading up to our S-1 registration. The items being
amended are:
Item 6: Selected Financial Data
Item 8: WASTE RECOVERY, INC.
Balance sheet--Liabilities and Equity
Statements of Operations
Statements of Cash Flows
Footnotes (1)(i)
Footnote (6)
Footnote (15)
Footnote (18)
Schedule VIII
WASTE RECOVERY -- ILLINOIS
Statement of Cash Flows
Footnotes (1)(l)
Footnote (12)
Item 12
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
WASTE RECOVERY, INC.
Registrant
Date: July 21, 1995 /s/ THOMAS L. EARNSHAW
Thomas L. Earnshaw
President and Chief Executive
Officer
/s/ SHARON K. PRICE
Sharon K. Price
Vice President of Finance
<PAGE> 3
WASTE RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Current Liabilities:
Notes payable (note 9) $ 170,915 $ 1,351,333
Current installments of long-term debt (note 10) 224,683 202,546
Long-term debt reclassified to current (note 10) -- 1,706,333
Current installments of capital lease obligations (note 6) 111,327 156,482
Accounts payable (note 15) 2,318,365 1,217,862
Accrued wages and payroll taxes 374,881 183,444
Other accrued liabilities 283,502 220,873
----------- -----------
Total current liabilities 3,483,673 5,038,873
----------- -----------
Long-term debt, excluding current installments
and debt reclassified to current (note 10) 3,065,447 284,205
Convertible subordinated debentures (note 11) 800,000 --
Obligations under capital leases, excluding
current installments (note 6) 137,138 74,971
----------- -----------
Total liabilities 7,486,258 5,398,049
----------- -----------
Minority interest (note 12) -- 840,988
----------- -----------
Stockholders' Equity (Deficit) (notes 12, 13, 14, 15 and 21):
Cumulative preferred stock, $1.00 par value, 250,000
shares authorized, 203,580 issued and
outstanding in 1994 and 1993 (liquidating
preference $13.21 per share, aggregating
$2,689,123) 203,580 203,580
Preferred stock, $1.00 par value, authorized
and unissued 9,750,000 shares in 1994 and
1993 -- --
Common stock, no par value, authorized
30,000,000 shares; 7,137,143 and 4,143,959
shares issued and outstanding in 1994 and 1993,
respectively 407,800 407,800
Additional paid-in capital 10,753,402 9,749,707
Accumulated deficit (10,032,083) (10,642,639)
----------- -----------
1,332,699 (281,552)
Treasury stock, at cost, 103,760 common shares (73,880) (73,880)
Note receivable for stock sold -- (7,500)
----------- -----------
Total stockholders' equity (deficit) 1,258,819 (362,932)
Commitments and contingencies (notes 6, 7, 20 and 21)
----------- -----------
$ 8,745,077 $ 5,876,105
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 4
WASTE RECOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Revenues:
Tire-derived fuel sales $1,104,691 $1,114,975 $1,242,464
Disposal fees, hauling and other revenue
(note 15) 11,320,714 7,625,518 6,820,392
---------- ---------- ----------
Total revenues 12,425,405 8,740,493 8,062,856
Operating expenses 9,058,241 6,160,148 5,093,876
---------- ---------- ----------
3,367,164 2,580,345 2,968,980
General and administrative expenses 2,099,579 1,660,449 1,559,784
Depreciation and amortization 694,984 742,397 696,871
---------- ---------- ----------
572,601 177,499 712,325
Other income (expense):
Interest income 21,553 14,951 18,207
Interest expense (400,314) (367,786) (371,603)
Other income (note 15) 9,697 67,340 248,880
Gains on sales of property and equipment 165,978 -- --
Loss on involuntary conversion of assets
(note 17) (186,242) -- --
Minority interest in income of partnership
(note 12) -- (87,617) (360,766)
Equity in loss from partnership operations
(note 7) (20,260) -- --
---------- ---------- ----------
(409,588) (373,112) (465,282)
Income (loss) before income taxes and
extraordinary item 163,013 (195,613) 247,043
Income tax benefit (expense) (note 16) 447,543 -- (100,000)
---------- ---------- ----------
Income (loss) before extraordinary item 610,556 (195,613) 147,043
Extraordinary item -- utilization of income tax
carry forwards (note 16) -- -- 100,000
---------- ---------- ----------
Net income (loss) $ 610,556 $ (195,613) $ 247,043
========== ========== ==========
Undeclared cumulative preferred stock dividends $ 142,502 $ 142,502 $ 142,895
========== ========== ==========
Net income (loss) available to common shareholders $ 468,054 $ (338,115) $ 104,148
========== ========== ==========
Net income (loss) per share:
Income (loss) before extraordinary item $ .06 $ (.08) $ --
---------- ---------- ----------
Extraordinary item (note 16) -- -- .02
---------- ---------- ----------
Net income (loss) per share $ .06 $ (.08) $ .02
========== ========== ==========
Weighted average number of common and dilutive
common equivalent shares outstanding 7,762,817 4,040,199 4,354,995
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 5
WASTE RECOVERY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 610,556 $ (195,613) $ 247,043
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,149,878 1,298,068 1,103,925
(Gains) losses on sales of property and equipment (165,978) 169 (2,000)
Deferred income taxes (447,543) -- --
Minority interest in income of partnership -- 87,617 360,766
Equity in loss from partnership operations 20,260 -- --
Changes in assets and liabilities:
Accounts receivable (1,002,815) (362,619) (85,554)
Note and other receivables (401,816) -- --
Inventories (721,117) (671,771) (559,175)
Other current assets (11,591) (22,561) (64,958)
Other assets (31,736) 21,451 (18,588)
Accounts payable 1,100,503 626,158 163,121
Accrued liabilities 301,566 171,912 (100,784)
Deferred income -- (45,000) (225,000)
----------- ---------- ----------
Net cash provided by operating activities 400,167 907,811 818,796
----------- ---------- ----------
Cash flows from investing activities:
Proceeds received on note receivable 100,000 -- --
Cash placed in restricted accounts (238,400) (32,585) (114,534)
Cash payments out of restricted accounts 90,000 75,000 46,593
Proceeds from sales of property, plant and equipment 205,737 6,131 7,000
Purchases of property, plant and equipment (804,790) (473,850) (408,293)
Investment in Waste Recovery -- Illinois (328,721) (100,338) --
----------- ---------- ----------
Net cash used by investing activities (976,174) (525,642) (469,234)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 242,673 247,850 197,673
Payment of notes payable (223,091) (197,775) (181,685)
Proceeds from issuance of long-term debt 95,637 -- --
Repayment of long-term debt (198,591) (212,130) (286,465)
Repayment of capital lease obligations (175,262) (119,987) (30,859)
Issuance of convertible subordinated debentures 800,000 -- --
Proceeds from issuance of common stock 155,795 42,320 4,160
Cash distributions to minority interest -- (81,551) (262,854)
----------- ---------- ----------
Net cash provided (used) by financing
activities 697,161 (321,273) (560,030)
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 121,154 60,896 (210,468)
Cash and cash equivalents at beginning of year 139,964 79,068 289,536
----------- ---------- ----------
Cash and cash equivalents at end of year $ 261,118 $ 139,964 $ 79,068
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 6
WASTE RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Bond Issuance Costs
Bond issuance costs are recorded at cost and amortized over the life of the
associated debt using the effective interest method.
(g) Other Assets
Patents, which are included in other assets, are recorded at cost and
amortized over a fifteen-year period using the straight-line method. Also
included in other assets as of December 31, 1994 is the noncurrent portion of a
note receivable, which approximates $87,000 at December 31, 1994 (see note 2).
(h) Income Taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (FAS 109), Accounting for Income Taxes. The adoption of FAS
109 changed the Company's method of accounting for income taxes from the
deferred method to an asset and liability approach. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the financial
carrying amounts and the tax bases of assets and liabilities. In 1992, deferred
income taxes were provided in accordance with Accounting Principles Board
Opinion No. 11 (APB 11). Under APB 11, deferred income taxes were provided for
timing differences in reporting income and expenses for financial statement
purposes and for tax purposes.
(i) Net Income (Loss) Per Common Share
Net income or loss per common share is computed on the weighted average
number of common shares and dilutive common equivalent shares outstanding each
year. Outstanding stock options, warrants, and conversion rights are common
stock equivalents but are excluded in 1993 from the calculation of loss per
common share since the effect would be antidilutive. Primary and fully diluted
earnings per share are the same in 1994 and 1992.
Net income or loss is adjusted by the effect of undeclared dividends on
preferred stock of $142,502, $142,502, and $142,895 for the years ended December
31, 1994, 1993, and 1992, respectively. The effect was to: (1) reduce the net
income per common share by .02 in 1994; (2) increase the net loss per common
share by .03 in 1993; and (3) reduce the net income per common share by .03 in
1992.
(j) Statements of Cash Flows
Capital lease obligations of $192,274, $156,906 and $236,093 were incurred
in 1994, 1993 and 1992, respectively, when the Company entered into leases for
new machinery and equipment.
The Company paid $377,558, $370,888, and $370,927 for interest in 1994,
1993, and 1992, respectively.
No federal income taxes were paid during 1994, 1993 or 1992.
(k) Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) NOTE AND OTHER RECEIVABLES
During 1994, the Company sold equipment for $300,000. The terms of the sale
included a down payment of $100,000, followed by a $75,000 payment due March 10,
1995, with the remaining $125,000 to be paid over a two-year term beginning
April 10, 1995, at $5,000 per month plus interest at a rate of 9% per annum. Of
the amount due March 10, 1995, $50,000 was received by that date. The current
portion ($113,000) of the note is
F-8
<PAGE> 7
WASTE RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) LEASES
The Company leases certain property and equipment under capital leases and
certain other property and equipment is leased under non-cancelable operating
leases which expire over the next five years. Property and equipment include the
following amounts for capital leases at December 31:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Hauling equipment $358,524 $257,950
Tire processing equipment 109,983 109,983
Furniture and fixtures 19,033 19,033
-------- --------
487,540 386,966
Less accumulated depreciation 154,018 127,752
-------- --------
$333,522 $259,214
======== ========
</TABLE>
A summary of the minimum rental commitments under noncancelable operating
leases and the present value of future minimum capital lease payments as of
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Year ending December 31:
1995 $133,591 $ 152,559
1996 68,599 158,689
1997 61,144 158,109
1998 34,822 123,781
1999 -- 105,130
Later years through 2000 -- 5,807
-------- ---------
298,156 $ 704,075
=========
Less: amount representing interest 49,691
--------
Present value of minimum lease payments $248,465
========
</TABLE>
Total rent expense for operating leases for the years ended December 31,
1994, 1993 and 1992 was $696,750, $506,513, and $368,999, respectively.
(7) INVESTMENT IN WASTE RECOVERY -- ILLINOIS
Waste Recovery -- Illinois was formed to jointly build and operate two
tire-derived fuel processing facilities in Dupo and Marseilles, Illinois. The
facilities will cost approximately $5 million each and are scheduled to be in
operation by mid 1995. Waste Recovery -- Illinois has a five year contract to
supply Illinois Power Company with 60,000 tons of TDF annually which represents
50% of the facilities' estimated production capacity.
Waste Recovery -- Illinois completed the sale of $8.875 million in solid
waste disposal revenue bonds as of September 27, 1994. The proceeds of the bonds
are being used to finance the construction of the two facilities. The Company is
guarantor on the bonds and, as manager of the Illinois partnership, is subject
to receive administrative fees of $4,000 per month plus a management fee based
on net income, as defined. No such fees are collectible by the Company until
actual operations of the Illinois partnership have begun.
At December 31, 1994, the Company's investment in the Illinois partnership
includes costs and expenses incurred by WRI which were not reimbursable to the
Company under the terms of the Illinois partnership
F-10
<PAGE> 8
WASTE RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
No transactions occurred during the year ended December 31, 1994.
At the 1992 Annual Meeting, the shareholders approved the 1992 Stock Plan
for Non-Employee Directors. Pursuant to such plan, non-employee directors of the
Company receive annually (1) after the annual meeting, a stock option to
purchase 2,500 shares of common stock so long as the Company's net income for
the fiscal year just ended improved over the prior year, and (2) in January, a
common stock grant valued at $2,000 for service as a director if attendance
criteria are met. Such plan terminates January 31, 2000 and 250,000 shares were
reserved by the Company for grants thereunder. Under this plan, 4,361 and 10,664
shares were issued for the years ended December 31, 1994 and 1993, respectively.
In connection with the formation of Waste Recovery Partners, Ltd., the
Company granted the general partner of KCT (see note 12) warrants to purchase
300,000 shares of common stock for investment banking services and 25,000 shares
of common stock at $.01/share for financial advisory services. Both warrants
were exercised in February 1994.
(14) STOCKHOLDERS' EQUITY
In 1990, the Company issued 203,580 shares of 7% cumulative preferred stock
redeemable at the Company's option for $10 per share. No dividends were declared
or paid on such preferred stock in 1994, 1993 or 1992. Accordingly, dividends in
arrears on cumulative preferred stock aggregated $653,322 at December 31, 1994
which represents $3.21 per share of such stock outstanding. Dividends on
cumulative preferred stock have been added to net loss or deducted from net
income for purposes of computing per common share amounts.
On February 20, 1990, trading of the stock of the Company was suspended by
the NASDAQ System. This suspension of trading occurred since the Company failed
to meet the NASDAQ capital and surplus requirements pursuant to paragraph
1(c)(3) of Part II of Schedule D of the NASD by-laws. The Company has applied
for relisting on the NASDAQ System. The Company's stock is currently traded in
the over-the-counter market.
(15) RELATED PARTY TRANSACTIONS
The Company received fees of $556,000 in 1994, $515,000 in 1993, and
$1,098,000 in 1992 for accepting and hauling scrap tires from a significant
stockholder. In 1994 and 1993, in lieu of directors' fees, 4,361 and 10,664
shares of the Company's common stock were issued to the outside directors,
respectively. The Company incurred $60,000 in consulting fees to certain
directors for assistance with the sale of the Waste Recovery -- Illinois bonds.
Included in accounts payable at December 31, 1994, is $81,083 due to Waste
Recovery -- Illinois.
For the year ended December 31, 1992, $225,000 is included in other income
which was generated from a Joint Market Evaluation Agreement with NIPSCO
Development Company, Inc., now an affiliate of the Waste Recovery-Illinois
partnership.
(16) INCOME TAXES
Upon adoption of FAS 109 at January 1, 1993, a gross deferred tax asset of
approximately $2,889,000 was recorded which primarily related to the future tax
benefits of net operating loss carry forwards of approximately $6,200,000 which
expire in 2000 -- 2005 and excess book over tax depreciation. Should certain
changes occur in the Company's ownership, there could be an annual limitation on
the amount of net operating loss available to offset taxable income. Upon
adoption, the Company believed that it was more likely than not that a
significant portion of the deferred tax asset would not be realizable and
recorded a valuation allowance of approximately $2,807,000 against the deferred
tax assets. The deferred tax assets are considered realizable only to the extent
they offset deferred tax liabilities on that date of approximately $82,000. The
F-15
<PAGE> 9
WASTE RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(18) BUSINESS AND CREDIT CONCENTRATIONS
The Company's customers are located in the Northwestern, the Southwestern
and the Southeastern United States. The Company derived revenues of $556,000,
$515,000 and $1,098,000 during the years ended December 31, 1994, 1993 and 1992,
respectively, for accepting and hauling scrap tires from a significant
stockholder. Five additional customers accounted for significant Company sales
for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Customer one $3,041,000 -- --
Customer two 1,566,000 1,138,000 746,000
Customer three 1,506,000 1,762,000 897,000
Customer four 750,000 679,000 553,000
Customer five 236,000 352,000 509,000
---------- ---------- ----------
Total $7,099,000 $3,931,000 $2,705,000
========== ========== ==========
</TABLE>
In addition to these customers, which are all significant entities, the
Company does business with a variety of companies with diverse credit risk. The
Company does not generally require collateral or other security from its
customers and has historically encountered very little loss on its receivables.
(19) PROFIT SHARING PLAN
Effective January 1, 1995, the Company adopted the Waste Recovery, Inc.,
401(k) Plan (the Plan), a defined contribution plan. Employees who have
completed six months of service and have attained the age of twenty-one are
eligible to become participants in the Plan. Participants may contribute up to
15% of their compensation, as defined, annually. Company contributions to the
Plan are determined at the discretion of the Board of Directors.
(20) LITIGATION AND CONTINGENCIES
The Company is a party to certain lawsuits which are generally incidental
to its business. Management does not believe the ultimate resolution of such
matters will have a significant effect on the Company's financial position and,
therefore, no liabilities have been recorded in the accompanying financial
statements.
Like other waste management companies, the Company's operations are subject
to extensive and changing federal and state environmental regulations governing
emissions into the atmosphere, wastewater discharges, solid and hazardous waste
management activities and site restoration and abandonment activities. As of
December 31, 1994, no such costs had been accrued and management does not
believe the affects of the aforementioned activities will have a material effect
on the Company's financial statements.
(21) SUBSEQUENT EVENTS
(a) Effective March 21, 1995, WRI acquired 100% of the outstanding stock of
Domino Salvage, Tire Division, Inc., (Domino), a scrap tire recycling company
located in Conshohocken, Pennsylvania, a suburb of Philadelphia. WRI will be
investing approximately $500,000 over the next six months into Domino to bring
Domino's scrap tire recycling capacity up to 5 million passenger tire
equivalents (PTE's) per year.
F-18
<PAGE> 10
SCHEDULE VIII
WASTE RECOVERY, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ------------------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 1992:
Allowance for doubtful accounts $ 13,202 $ 21,500 $ -- $ 21,901 $ 12,801
========= ======== ======== ======== ========
Year ended December 1993:
Allowance for doubtful accounts $ 12,801 $ 32,667 $ -- $ 15,150 $ 30,318
========= ======== ======== ======== ========
Year ended December 1994:
Allowance for doubtful accounts $ 30,318 $ 36,063 $ -- $ 41,381 $ 25,000
========= ======== ======== ======== ========
</TABLE>
- ---------------
(1) Amount represents the allowance for doubtful accounts, a contra account to
trade accounts receivable.
F-20
<PAGE> 11
WASTE RECOVERY -- ILLINOIS
(AN ILLINOIS GENERAL PARTNERSHIP)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994
-----------
<S> <C>
Cash flows from operating activities:
Net loss $ (45,023)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization expense 25,969
Changes in assets and liabilities:
Inventory 3,085
Other current assets (41,370)
Payment of bond issuance costs (547,868)
Other assets (72,513)
Accounts payable 13,148
-----------
Net cash used by operating activities (664,572)
-----------
Cash flows from investing activities:
Cash placed in investment accounts (7,396,918)
Cash payments out of investment accounts 3,119,441
Cash placed in restricted cash (1,366,400)
Receivable from Waste Recovery, Inc. (100,040)
Preoperating costs (179,493)
Purchases of property, plant and equipment (107,786)
Additions to construction in progress (1,922,817)
Deferred grant revenue 800,000
-----------
Net cash used by investing activities (7,154,013)
-----------
Cash flows from financing activities:
Proceeds from issuance of bonds payable 8,916,664
Proceeds from issuance of long-term debt 16,000
Proceeds from partner's contribution 1,000,000
-----------
Net cash provided by financing activities 9,932,664
-----------
Net increase in cash and cash equivalents 2,114,079
Cash and cash equivalents at beginning of year 555,000
-----------
Cash and cash equivalents at end of year $ 2,669,079
===========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 12
WASTE RECOVERY -- ILLINOIS
(AN ILLINOIS GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(g) Construction in Progress
Construction of the Illinois plants began in 1994; completion for Dupo is
scheduled for June 1995; completion for Marseilles is scheduled for July 1995.
The costs being incurred to build the plants and equipment are being capitalized
as construction in progress until the projects are completed and individual
assets can be identified, at which time, the assets will be reclassified into
property, plant and equipment and depreciated over their estimated useful lives.
(h) Bond Issuance Costs
Bond issuance costs are recorded at cost and amortized over the life of the
associated debt using the amount of bonds outstanding method.
(i) Other Assets
Other assets are recorded at cost and consist mainly of prepaid, additional
rent in the amount of $50,000 for the land at the Dupo plant which is being
amortized over the term of the lease, and bank finance fees, which are being
amortized over the term of the bonds.
(j) Deferred Grant Revenue
The Partnership has an agreement whereby it is eligible to receive a total
of $1,000,000 in grants from the State of Illinois upon the successful
completion of certain equipment at the Illinois plants. As of December 31, 1994,
the Partnership had received $800,000 from these grants. The grant money
received will be amortized, beginning when the plants are placed in operation
and the related equipment is in acceptable working condition, through the term
of the grants, which is July 31, 1999. The remaining $200,000 is eligible to be
received when the specified equipment has been completed and is operational.
(k) Income Taxes
No provision or credit for federal income taxes has been made because
income taxes are the responsibility of the individual partners.
(l) Statement of Cash Flows
The Partnership did not pay any interest or income taxes during 1994.
Interest expense totaled $150,629 and interest income totaled $145,359 for the
year ended December 31, 1994. Of these amounts, $139,941 of interest expense was
offset against eligible interest income, and $10,688 was capitalized into the
cost of construction.
(2) INVENTORY
Inventory at December 31, 1994 consists of TDF contributed by WRI's
Portland and Houston plants, 114 tons of which were used in the Baldwin plant in
trials; the remaining 3,680 tons are being stored and will be utilized in the
Baldwin facility in 1995.
F-27
<PAGE> 13
WASTE RECOVERY -- ILLINOIS
(AN ILLINOIS GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the minimum rental commitment under this noncancelable
operating lease as of December 31, 1994 is as follows:
<TABLE>
<S> <C>
Year ending December 31:
1995 $ 12,000
1996 12,000
1997 12,000
1998 12,000
1999 12,000
Later years through 2014 177,000
--------
$237,000
========
</TABLE>
(11) SIGNIFICANT CONTRACTS
The Partnership entered into a contract with Illinois Power Company on
October 12, 1993, to supply it with at least 60,000 tons of TDF per year for a
period of five years. If the Partnership is unable to fulfill this requirement,
WRI will sell TDF to the Partnership produced at its other facilities. Sales of
TDF are projected to begin in early 1995, with plant operations beginning at
Dupo and Marseilles in mid 1995.
(12) INCOME TAXES
The following provides a reconciliation of the net loss to the
distributable taxable loss to the partners as of December 31, 1994:
<TABLE>
<CAPTION>
WRI RCC TOTAL
-------- -------- --------
<S> <C> <C> <C>
Net loss $(20,260) $(24,763) $(45,023)
Increase (reduction) in taxable loss as distributable
to partners results from:
Meals and entertainment 205 250 455
-------- -------- --------
Distributable taxable loss to partners $(20,005) $(24,513) $(44,568)
======== ======== ========
</TABLE>
F-31
<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on March 31, 1995, there was a total 7,149,509
shares of Common Stock, issued and outstanding. At that date, to the knowledge
of the Management of the Company, no person owned of record or beneficially more
than 5% of the outstanding Common Stock of the Company, except as set forth in
the following table. Unless indicated otherwise, shares are directly owned, are
non-derivative, and each party has sole voting and investment power with respect
to such shares.
BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMMON STOCK OF THE COMPANY
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING SHARES(1)
- --------------------------------------------------------- ---------------- ---------------------
<S> <C> <C>
The Goodyear Tire & Rubber Company....................... 400,000 4.7%(2)
1144 East Market Street
Akron, Ohio 44316
Crandall S. Connors...................................... 373,257(3) 4.3%(2)
Kerr, Connors Group(4)................................... 1,778,303 20.7%
108 Forest Avenue
Locust Valley, New York 11560
</TABLE>
- ---------------
(1) Outstanding shares for the purpose of calculating these percentages do not
include shares held by or for the account of the Company, but include
shares which can be acquired within sixty days by the exercise of stock
options or conversion of the Company's 10% Convertible Subordinated
Debentures ("Debentures").
(2) If only options or conversion rights held by this owner, if any, are
included in the calculation, the percentage is five percent or greater.
(3) Includes 292,257 shares directly held and 81,000 shares issuable upon
conversion of Debentures held by a Partnership. Does not include shares
beneficially owned by other partners of such partnership, or held by other
members of the Kerr, Connors Group (see following footnote).
(4) During November, 1994, the Company received an amended Schedule 13D whereby
Kerr, Connors & Co., its partners John C. Kerr and Crandall S. Connors, and
certain other persons (the "Kerr, Connors Group"), filed with the
Securities and Exchange Commission as a group. Such Schedule 13D stated
that the reporting persons had reached an oral arrangement of unspecified
duration with respect to the voting and transfer of such stock. The group
ownership reported is based on such Schedule 13D and independent
information of the Company. Messrs. Kerr and Connors, and certain other
members of such group, were partners in KCT Associates, Ltd., a limited
partnership which was the limited partner of Waste Recovery Partners, Ltd.,
of which the Company was the general partner. Kerr, Connors & Co. was
retained in 1991 and 1993 as financial advisors to the Company. For more
detail regarding such partnerships and Kerr, Connors & Co., see Item 13.
The address is that of Kerr, Connors & Co., and not of all members of such
group.
22
<PAGE> 15
The following table shows all shares of the Company's Common Stock
beneficially owned, directly or indirectly, by each member of the Board of
Directors, and certain executive officers, individually, and by all directors
and executive officers as a group.
COMMON STOCK BENEFICIALLY OWNED OR THAT MAY BE ACQUIRED PURSUANT TO
STOCK OPTIONS AS OF MARCH 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES AND PERCENT OF OUTSTANDING
NAME NATURE OF OWNERSHIP SHARES(10)
- ------------------------------------------------------ -------------------- ----------------------
<S> <C> <C>
Crandall S. Connors................................... 373,257(1) 4.3%
Roger W. Cope......................................... 39,227(2) 0.5%
Michael C. Dodge...................................... 198,439(3) 2.3%
Thomas L. Earnshaw.................................... 127,928(4) 1.5%
Steven E. MacIntyre................................... 139,102(5) 1.6%
Allan Shivers, Jr..................................... 319,771(6) 3.7%
Robert L. Thelen...................................... 132,867(7) 1.5%
W. David Walls........................................ 23,908(8) 0.3%
Directors & Executive Officers as a Group (10
persons)............................................ 1,365,799(9) 15.9%
</TABLE>
- ---------------
(1) Includes 292,257 shares directly held and 81,000 shares issuable upon
conversion of Debentures held by a partnership. Does not include shares
beneficially owned by other partners of such partnership, or held by other
members of the Kerr, Connors Group.
(2) Includes 21,727 shares held directly and 17,500 shares issuable upon
exercise of stock options.
(3) Includes 157,082 shares held directly, 17,500 shares issuable upon exercise
of stock options and 23,857 shares issuable upon conversion of Debentures.
(4) Includes 16,000 shares held directly, 100,000 shares issuable upon exercise
of stock options and 11,928 shares issuable upon conversion of Debentures.
(5) Includes 103,317 shares held directly and 35,785 shares issuable upon
conversion of Debentures, but does not include shares held by other members
of the Kerr, Connors Group.
(6) Includes 78,414 shares held directly, 217,500 shares issuable upon exercise
of stock options and 23,857 shares issuable upon conversion of Debentures.
(7) Includes 54,510 shares held directly, 4,500 held of record by his wife,
50,000 shares issuable upon exercise of stock options and 23,857 shares
issuable upon conversion of debt.
(8) Includes 3,516 shares held directly, 2,500 shares issuable upon exercise of
stock options and 17,892 shares issuable upon conversion of Debentures.
Shares previously held directly by Mr. Walls were recently transferred
pursuant to a qualified domestic relations order.
(9) Includes 415,000 shares representing stock options and 229,319 shares
representing the Debentures and certain convertible debt.
(10) Outstanding shares for the purpose of calculating these percentages do not
include shares held by or for the account of the Company, but include
shares which can be acquired within sixty days by the exercise of stock
options or conversion of Debentures. Except for shares beneficially owned
by virtue of options or Debentures, and except as otherwise indicated in
this table, the balance of shares are directly owned. Unless indicated to
the contrary, the owner has sole voting and investment power.
23
