SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to Current Report
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report: February 22, 1997
WASTE RECOVERY, INC.
(Exact name of Registrant as specified in its Charter)
TEXAS 75-1833498
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
309 S. PEARL EXPRESSWAY, DALLAS, TX 75201
(Address of principal executive offices) (Zip Code)
(214) 741-3865
(Registrant's Telephone Number, Including Area Code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ---------------------------------------------
Item 2 as filed in Form 8-K is amended in its enterety to read as follows:
On December 9, 1996, Waste Recovery, Inc. (the "Registrant"), and its
wholly-owned subsidiary, New U.S. Tire Recycling Corp., consummated the
acquisition of U.S. Tire Recycling Partners, L.P. ("UST"). New U.S. Tire
Recycling Corp. acquired by mrger Bodner/Greenstein Capital Holdings, Inc. and
Tirus, Inc., and the Registrant, pursuant to an asset purchase agreement,
acquired the interests in Tirus Associates, L.L.C. from Environmental Venture
Fund, L.P. and Argentum Capital, L.P., thereby resulting in the transfcer of all
the partnership interests of UST. The consideration paid by the Registrant and
New U.S. Tire Recycling Corp. in the transaction consisted of approximately 3.2
million newly issued unregistered shares of Common Stock of the Registrant, and
$1,850,000 of convertible subordinated debt of the Registrant. The interest were
acquired pursuant to the terms of an Agreement and Plan of Reorganization dated
as of September 30, 1996. The Registrant will continue use of the assets
acquired in substantially the same manner as UST has in the past..
On December 16, 1996, the Registrant, through its subsidiary Waste
Recovery-Illinois, L.L.C., consummated the acquisition from Riverside Caloric
Co. ("RCC") of its 55% interest in the Waste Recovery-Illinois gneral
partnership, in which the Registrant held the remaining 45% interest. The
partnership interest waws acquired pursuant to the termws of an acquisition
agreement dated December 16, 1996 between RCC, the Registrant, and Waste
Recovery-Illinois, L.L.C. The partnership interest was acquired in exchange for
1.1 million newly issued unregistered shares of Common Stock of the Registrant
Waste Recovery-Illinois operates two facilities in Illinois that process scrap
tires into tire-derived fuel.
Item 7. Financial Statements. Pro Forma Financial Information and Exhibits.
- ----------------------------------------------------------------------------
a. Financial Statements.
--------------------
The financial statements, together with the report of
independent auditors, are included on pages F-1 through F-33
of this document.
b. Pro Forma Financial Information.
-------------------------------
The pro forma financial information is included on pages P-1
through P-7 of this document.
<PAGE>
c. Exhibits.
--------
1.1 Agreement and Plan Reorganization dated as of the 30th
day of September, 1996 by and among Waste Recovery,
Inc., New U.S. Tire Recycling Corp., U.S. Tire
Recycling Partners, L.P., Bodner/Greenstein Capital
Holdings, Inc., Tirus, Inc., Tirus Associates, L.L.C.,
Environmental Venture Fund, L.P., Argentum Capital,
L.P., and Certain Shareholders. Incorporated by
reference to Exhibit 1.1 of the Registrant's Current
Report On Form 8-K.
1.2 Partnership Purchase Agreement dated as of December 16,
1996, between Riverside Caloric Company, Waste
Recovery, Inc., and Waste Recovery-Illinois, L.L.C.
Incorporated by reference to Exhibit 1.1 of the
Registrant's Current Report On Form 8-K
1.3 Press Release issued December 2, 1996. Incorporated by
reference to Exhibit 1.1 of the Registrant's Current
Report On Form 8-K.
1.4 Press Release issued December 20, 1996. Incorporated by
reference to Exhibit 1.1 of the Registrant's Current
Report On Form 8-K.
[End of Page]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
WASTE RECOVERY, INC.
DATE: February 22, 1997 /s/THOMAS L. EARNSHAW
----------------------------------------------
By: THOMAS L. EARNSHAW
President and Chief Executive Officer
(Principal Executive Officer)
<PAGE>
INDEX TO ACQUIRED BUSINESS FINANCIAL STATEMENTS
-----------------------------------------------
U.S. Tire Recycling Partners, L. P.
- -----------------------------------
Independent Auditors' Report F-1
Financial Statements:
Balance Sheets at December 31, 1995 and 1994 F-2
Statements of Income for the Two Years Ended
December 31, 1995 F-4
Statements of Partners' Capital for the Two Years Ended
December 31, 1995 F-5
Statements of Cash Flows for the Two Years Ended
December 31, 1995 F-6
Notes to Financial Statements F-7
Interim Financial Statements:
Balance Sheets as of September 30, 1996 (unaudited) F-13
And December 31, 1995
Statements of Income for the Nine Months Ended
September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) F-15
Statements of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) F-16
Waste Recovery - Illinois
- -------------------------
Report of Independent Accountants F-17
Financial Statements:
Balance Sheets at December 31, 1995 and 1994 F-18
Statements of Operations for the Two Years Ended
December 31, 1995 F-20
Statements of Changes in Partners' Capital for the Two Years Ended
December 31, 1995 F-21
Statements of Cash Flows for the Two Years Ended
December 31, 1995 F-22
Notes to Financial Statements F-23
Interim Financial Statements:
Balance Sheets as of September 30, 1996 (unaudited)
and December 31, 1995 F-30
Statements of Income for the Nine Months Ended
September 30, 1996 (unaudited)
and September 30, 1995 (unaudited) F-32
Statements of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited) F-33
and September 30, 1995 (unaudited)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of U.S. Tire Recycling Partners, L.P.
Concord, North Carolina
We have audited the accompanying balance sheets of U.S. Tire Recycling Partners,
L.P. (a limited Partnership) as at December 31, 1995 and 1994, and the related
statements of income, partners' capital and cash flows for the years then ended.
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 audits 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 financial position of U.S. Tire Recycling Partners,
L.P. as at December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended.
COHEN & ROSEN, P.C.
New York, New York
February 28, 1996
F-1
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
---- ----
Current Assets:
Cash and cash equivalents (note 12) $ 202,507 $ 167,915
Accounts receivable 328,809 412,032
Prepaid expenses 13,733 30,115
Inventory (notes 1 and 2) 65,256 2,996
Due from partner (note 3) 5,052 1,417
- --------- ---------
Total current assets 615,357 614,475
--------- ---------
Property, plant and equipment (notes 1, 4, 8 and 9) 1,681,766 1,606,601
--------- ---------
Mineral reserves (notes 1 and 6) 332,222 447,778
--------- ---------
Other Assets:
Security deposits 65,385 22,272
Intangible assets (notes 1 and 7) 220,031 217,043
Due from affiliated entity (notes 5 and 11) 110,781 -
--------- ---------
Total other assets 396,197 239,315
--------- ---------
Total Assets $3,025,542 $2,908,169
========= =========
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
BALANCE SHEETS
December 31, 1995 and 1994
LIABILITIES AND PARTNERS' CAPITAL
1995 1994
---- ----
Current Liabilities:
Accounts payable and accrued expenses $ 188,692 $ 177,050
Current portion of long-term debt (note 8) 88,193 56,031
Current portion of mortgages payable (note 9) 297,619 250,000
Taxes accrued and withheld 8,346 15,463
Income taxes payable (note 1) 31,812 20,935
- --------- ---------
Total current liabilities 614,662 519,479
--------- ---------
Non-Current Liabilities:
Long-term debt (note 8) 207,325 58,177
Mortgages payable (note 9) 952,381 1,187,500
- --------- ---------
Total non-current liabilities 1,159,706 1,245,677
--------- ---------
Total Liabilities 1,774,368 1,765,156
--------- ---------
Commitments and contingencies (notes 10 and 12)
Partners' Capital 1,251,174 1,143,013
--------- ---------
Total Liabilities and Partners' Capital $3,025,542 $2,908,169
========= =========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
STATEMENTS OF INCOME
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---------------------------- ---------------------------
% To % To
Revenues Revenues
Revenues:
Sales $ 4,453,261 97.3 $ 3,514,175 96.4
Royalties 110,437 2.4 126,332 3.5
Interest income 11,767 .3 3,809 .1
----------- ----- ----------- -----
Total revenues 4,575,465 100.0 3,644,316 100.0
----------- ----- ----------- -----
Operating Expenses:
Site expenses 2,171,759 47.5 1,534,282 42.1
Tires and freight expenses (note 11) 1,073,282 23.4 883,319 24.2
----------- ----- ----------- -----
Total operating expenses 3,245,041 70.9 2,417,601 66.3
----------- ----- ----------- -----
Operating Income 1,330,424 29.1 1,226,715 33.7
----------- ----- ----------- -----
Other Expenses:
General and administrative expenses (note 11) 141,211 3.1 188,771 5.2
Depreciation, amortization and depletion
(notes 1, 4, 6 and 7) 330,160 7.2 316,528 8.7
Interest expense (notes 8 and 9) 153,580 3.4 161,591 4.4
Supervisory management fees (note 11) 265,400 5.8 235,400 6.5
------- ----- ----------- -----
Total other expenses 890,351 19.5 902,290 24.8
----------- ----- ----------- -----
Income before provision for income taxes 440,073 9.6 324,425 8.9
Provision for income taxes (note 1) 31,912 .7 20,984 .6
- ----------- ----- ----------- -----
Net Income $ 408,161 8.9 $ 303,441 8.3
=========== ===== =========== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C>
General Limited
Total Partner Partners
---------- --------- ----------
Partners' capital, January 1, 1994 $ 839,572 $ 8,396 $ 831,176
Net income for the year ended December 31, 1994 303,441 3,034 300,407
--------- ------- ---------
Partners' capital, December 31, 1994 1,143,013 11,430 1,131,583
Net income for the year ended December 31, 1995 408,161 4,082 404,079
Partners' capital distributions for the year ended
December 31, 1995 (300,000) - (300,000)
--------- ------- ---------
Partners' capital, December 31, 1995 $1,251,174 $ 15,512 $1,235,662
========= ======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 408,161 $ 303,441
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 182,927 159,782
Amortization 31,677 55,633
Depletion 115,556 101,111
Loss on disposal of equipment 81,648 14,062
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 83,223 (188,675)
Decrease in prepaid expenses 16,382 30,711
Increase in inventory (62,260) (2,996)
Increase in accounts payable and accrued expenses 11,642 5,870
(Decrease) increase in taxes accrued and withheld (7,117) 5,664
Increase in income taxes payable 10,877 19,351
---------- ----------
Net cash provided by operating activities 872,716 503,954
---------- ----------
Cash flows from investing activities:
(Loan to) repayment from partner (3,635) 68,313
Acquisition of property, plant and equipment (436,505) (200,421)
Proceeds from sale of equipment 96,765 7,948
Increase in security deposits (43,113) (15,706)
Payment of site license expenses (34,665) (93,246)
Loan to affiliated entity (110,781) -
---------- ----------
Net cash used in investing activities (531,934) (233,112)
---------- ----------
Cash flows from financing activities:
Partnership distributions (300,000) -
Proceeds from long-term debt 260,600 43,995
Payment of mortgage payable (187,500) (312,500)
Payments of long-term debt (79,290) (67,428)
Repayment of loan from partner - (15,220)
---------- ----------
Net cash used in financing activities (306,190) (351,153)
---------- ----------
Net increase (decrease) in cash and cash equivalents 34,592 (80,311)
Cash and cash equivalents - January 1 167,915 248,226
---------- ----------
Cash and cash equivalents - December 31 $ 202,507 $ 167,915
========== ==========
Supplemental disclosures of cash flow information:
- ----------------------------------------------------
Cash paid during the year for:
Interest $153,580 $161,591
Income Taxes $21,084 $1,633
Supplemental schedule of non-cash investing activities:
- -------------------------------------------------------
During 1994, the Company acquired a site license from an affiliated entity in
exchange for the redemption of stock ownership in that entity in the amount of
$109,364.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
Notes to Financial Statements
December 31, 1995 and 1994
Note 1: Summary of Significant Accounting Policies:
(a) Organization: U.S. Tire Recycling Partners, L.P., a limited
------------ partnership, was formed on April l, 1992 for the
purpose of acquiring land and equipment to be used in the tire
recycling business. The Company collects and receives scrap tires
from counties and other privately owned waste facilities located
throughout the southeastern portion of the United States. The
tires are sorted, examined and either sold as casings or used
tires, processed and sold as tire derived products, or shredded
and used to reclaim previously mined Company land. Additionally,
the site is being mined for sand and gravel by an outside party.
The net profit and losses and cash flows of the limited
partnership are allocated to the partners in accordance with the
Limited Partnership Agreement.
(b) Property, Plant and Equipment: Property, plant and equipment is
------------------------------ recorded at cost, and
depreciated on straight-line and accelerated methods over the
estimated useful lives of the assets.
(c) Inventory: Inventory is stated at the lower of cost determined by
---------
the first-in, first-out (FIFO) method or market.
(d) Mineral Reserves: Mineral reserve costs are capitalized and are
-----------------
being depleted based on the percentage of reserves that are
actually mined.
(e) Intangible Assets: Intangible assets are capitalized and are
------------------
being amortized on the straight-line method over their estimated
useful lives ranging from 5 to 15 years.
(f) Income Taxes: Pursuant to the Internal Revenue Code, the taxable
------------
income of the Partnership is taxed directly to the Company's
partners and not to the Company. The State of North Carolina,
however, requires the Company to pay income tax on the income
allocable to the non-resident partners.
(g) Statements of Cash Flows: For the purpose of the Statements of
-------------------------
Cash Flows, the Company considers all money market accounts to be
cash equivalents.
(h) Use of Estimates: The preparation of financial statements in
-----------------
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Although these estimates are based on management's
knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.
(i) Advertising Costs: Advertising costs are expensed as incurred.
------------------
Expense for the years ended December 31, 1995 and 1994 were
$3,789 and $23,983, respectively.
Note 2: Inventory:
At December 31, 1995 and 1994, inventory consists of finished goods costing
$65,256 and $2,996, respectively.
Note 3: Due from Partner:
Due from partner are non-interest bearing advances that are payable on
demand.
F-7
<PAGE>
Note 4: Property, Plant and Equipment:
At December 31, property, plant and equipment consists of the
following:
<TABLE>
<CAPTION>
<S> <C>
1995 1994
---- ----
Land $ 602,596 $ 602,596
Land improvements 347,230 328,877
Building 40,635 40,635
Machinery and equipment 548,525 555,558
Trailers 340,813 266,773
Vehicles 165,149 128,516
Furniture and fixtures 17,475 11,135
------------ ------------
2,062,423 1,934,090
Less: accumulated depreciation and amortization 436,657 327,489
------------ ------------
1,625,766 1,606,601
Deposit on equipment 56,000 -
------------ ------------
$ 1,681,766 $ 1,606,601
============ ============
</TABLE>
Depreciation and amortization expenses charged to operations during
1995 and 1994 was $182,927 and $159,782, respectively.
Note 5: Due from Affiliated Entity:
Due from affiliated entity are non-interest bearing advances net of
repayments and offset of receivables that are payable on demand. The
balance is classified as non-current due to management not anticipating
repayment during 1996. Management has not determined the fair value of
the notes due to the additional cost involved in obtaining an
appraisal.
Note 6: Mineral Reserves:
The Company has engaged another company to mine certain parcels of land
for sand and gravel. Management estimates that 45 acres of the land can
be mined. As such, based on the allocated mineral reserve cost of
$650,000, depletion expense charged to operations during 1995 and 1994
was $115,556 and $101,111, respectively.
Note 7: Intangible Assets:
At December 31, intangible assets consists of the following:
1995 1994
---- ----
Organization costs $ 6,500 $ 256,500
Site license 237,275 202,610
Non-compete agreement 16,673 16,673
Customer list 16,673 16,673
Goodwill 12,500 12,500
289,621 504,956
Less: accumulated amortization 69,590 287,913
-------- --------
$ 220,031 $ 217,043
======== ========
Amortization expenses charged to operations during 1995 and 1994, was
$31,677 and $55,633, respectively.
F-8
<PAGE>
Note 8: Long-term Debt:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---- ----
(a) Notes payable to finance companies in monthly installments
aggregating $5,717, including interest ranging from 7.5% to
16%, per annum, expiring through May, 1997, collateralized by
various property, plant and equipment. $ 27,883 $ 70,471
(b) Notes payable to banks in monthly installments aggregating
$8,253, including interest ranging from 8% to 10.5%, per
annum, expiring through November, 2000, collateralized by
various property, plant and equipment. 267,635 43,737
------- -------
Total long-term debt 295,518 114,208
Less: current portion 88,193 56,031
------- -------
$ 207,325 $ 58,177
</TABLE>
The annual future maturities of long-term debt are as follows:
Year ending
December 31, Amount
------------ ------
1996 $ 88,193
1997 72,689
1998 53,348
1999 51,864
2000 29,424
---- ----------
Total $ 295,518
==========
Management has not determined the fair value of the notes due to the
additional cost involved in obtaining an appraisal.
Note 9: Mortgage Payable:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---- ----
(a) Mortgage payable to a third party in monthly installments of
interest only (approximately $7,000 per month at the prime
rate) through August, 1996. Commencing on September l, 1996,
the mortgage will be payable in monthly installments of
$16,601 including interest at the prime rate, through
August, 2003. The mortgage is collateralized by $ 1,000,000 $ 1,000,000
the land.
(b) Second mortgage payable to an affiliated entity
controlled by certain partners in quarterly
installments of $62,500 plus interest at 12%, per
annum, through December 1996. The note is
collateralized by all property, plant and equipment
and is subordinated to the first mortgage. 250,000 437,500
---------- ----------
Total mortgages payable 1,250,000 1,437,500
Less: current portion 297,619 250,000
---------- ----------
$ 952,381 $ 1,187,500
========== ==========
</TABLE>
Interest paid to the affiliated entity during 1995 and 1994 was
$43,438 and $70,625, respectively.
F-9
<PAGE>
The annual future maturities of the mortgages payable are as follows:
Year ending
December 31, Amount
------------ ------
1996 $ 297,619
1997 142,857
1998 142,857
1999 142,857
2000 142,857
Thereafter 380,953
---------
Total $1,250,000
==========
Management has not determined the fair value of the notes due to the
additional cost involved in obtaining an appraisal.
Note 10: Commitments and Contingencies:
(a) Upon filling each portion of the landfill with tires, the Company
is required to close the landfill according to regulations set by
Federal and North Carolina and County waste management
regulations. Closure costs charged to operations during 1995 and
1994 were $0 and $20,436, respectively.
(b) In order to comply with Federal, North Carolina and County waste
management regulations, the Company must obtain various licenses
and permits that expire from time to time during the course of
the year. It is management's opinion that all required licenses
and permits have been and will continue to be obtained in a
timely manner.
(c) Under the terms of an agreement to provide services to various
customers, the Company has put up $117,300 of performance bonds
that are secured by a $100,000 letter of credit from a limited
partner.
Note 11: Related Party Transactions:
(a) The Company pays the general partner, U.S. Tire Recycling Corp. a
supervisory management fee based on an agreement as follows: (1)
Base fee of $200,000, per annum, payable in semi-monthly
installments of $8,333. (2) Travel reimbursement to the general
partner. (3) A budget performance bonus as defined in the
agreement.
During 1995 and 1994, a supervisory management fee of $265,400 and
$235,400, respectively was charged to operations.
(b) During 1994, a limited partner was paid a consulting fee of
$10,000.
(c) During 1995 and 1994, the Company paid approximately $184,966 and
$20,000 to an affiliated entity for sales and services.
Note 12: Cash and Cash Equivalents:
At December 31, 1995, the Corporation had $252,765 on deposit with
South Trust Bank of Central Carolina which exceeds FDIC insurance of
$100,000.
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of U.S. Tire Recycling Partners, L.P.
Concord, North Carolina
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
---------------------------------------------------------
Our audit of the basic financial statements were made primarily to form an
opinion on such financial statements taken as a whole. The supplementary
information contained on the following page is presented for the purposes of
additional analysis and, although not required for a fair presentation of
financial position, results of operations, and cash flows, was subjected to the
audit procedures applied in the audit of the basic financial statements. In our
opinion, the supplementary information is fairly presented in all material
respects in relation to the basic financial statements taken as a whole.
COHEN & ROSEN
New York, New York
February 28, 1996
F-11
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
SCHEDULES TO THE STATEMENTS OF INCOME
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---------------------------- ---------------------------
% to % to
Revenues Revenues
SITE EXPENSES:
Salaries $ 1,050,688 23.0 $ 870,822 23.9
Payroll taxes 88,902 2.0 74,895 2.0
Supplies 38,221 .8 30,512 .8
Outside labor 32,293 .7 64,538 1.8
Closure costs - .0 20,436 .6
Small tools 4,788 .1 7,954 .2
Repairs and maintenance 149,898 3.3 134,024 3.7
Loss on equipment disposal 81,648 1.8 14,062 .4
Insurance 231,456 5.1 208,866 5.7
Commissions - .0 13,257 .4
Licenses and permits 5,879 .1 197 .0
Uniforms 1,984 .0 869 .0
Real estate taxes 15,021 .3 9,443 .3
Payroll service 4,472 .1 3,634 .1
Bad debts 11,030 .3 4,708 .1
Royalties 95,423 2.1 17,701 .5
Tire disposal fees 358,593 7.8 55,923 1.5
Miscellaneous 1,463 .0 2,441 .1
---------- ---- ---------- ----
Total site expenses $ 2,171,759 47.5 $ 1,534,282 42.1
========== ==== ========== ====
TIRES AND FREIGHT EXPENSES:
Inventory - January 1 $ 2,996 .1 - $ .0
Purchases 184,966 4.0 - .0
Tire replacements 35,045 .8 30,733 .9
Independent contractors 22,950 .5 61,857 1.7
Third party trucking 698,406 15.2 625,317 17.2
Vehicle repairs 160,793 3.5 114,430 3.1
Equipment rental 22,684 .5 45,289 1.2
Shipping 10,698 .2 8,689 .2
Inventory - December 31 (65,256) (1.4) (2,996) (.1)
-- ---------- ---- ------------ ----
Total freight expenses $ 1,073,282 23.4 $ 883,319 24.2
========== ==== =========== ====
GENERAL AND ADMINISTRATIVE EXPENSES:
Advertising and promotion $ 3,789 .1 $ 23,983 .7
Postage 5,410 .1 5,571 .2
Professional fees 34,349 .8 54,853 1.5
Office expenses 9,616 .2 11,379 .3
Travel and entertainment 46,268 1.0 45,501 1.3
Utilities 16,547 .4 11,481 .3
Telephone 17,482 .4 21,288 .6
Dues and subscriptions 1,477 .0 1,724 .0
Consulting 5,473 .1 11,976 .3
Charitable contributions 800 .0 1,015 .0
---------- ---- ------------ ----
Total general and administrative expenses $ 141,211 3.1 $ 188,771 5.2
========== ==== =========== ====
</TABLE>
See independent auditors' report on supplementary information.
F-12
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
BALANCE SHEETS
ASSETS
September 30, 1996 December 31, 1995
------------------ -----------------
Current assets: (unaudited) (unaudited)
Cash and cash equivalents $ 179,352 $ 202,507
Accounts receivable 542,091 328,809
Other receivables 66,833 5,052
Inventory - 65,256
Other current assets 29,752 13,733
--------- ----------
Total current assets 818,028 615,357
--------- ----------
Property, plant and equipment 1,695,407 1,681,766
--------- ----------
Mineral reserves 288,887 332,222
--------- ----------
Other assets:
Intangible assets 51,759 220,031
Other assets 54,862 65,385
--------- ----------
Due form affiliated entity 110,781 396,197
Total other assets - 106,621
--------- ----------
Total assets $2,908,943 $ 3,025,542
========= ==========
F-13
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL
September 30, 1996 Decembe 31,1995
------------------ ---------------
Current liabilities: (unaudited)
Accounts payable and accrued expenses $ 81,777 $ 188,692
Current portion of long-term debt 103,276 88,193
Current portion of mortgages payable 142,857 297,619
Taxes accrued and withheld 29,953 8,346
Other accrued liabilities 76,525 31,812
----------- ---------
Total current liabilities 434,388 614,642
----------- ---------
Non-Current liabilities:
Long-term debt 204,159 207,325
Mortgages payable 833,333 952,381
----------- ---------
Total non-current liabilities 1,037,492 1,159,706
----------- ---------
Total liabilities 1,471,880 1,174,368
----------- ---------
Partners' capital 1,437,063 1,251,174
----------- ---------
Total liabilities and partners' capital $ 2,908,943 $3,025,542
=========== =========
F-14
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended September 30,
1996 1995
---- ----
Revenues:
Tire-derived fuel sales $ 182,113 $ -
Royalties 78,340 79,145
Disposal fees, hauling and other 3,109,555 325,144
--------- ---------
Total revenues 3,370,008 3,402,289
Operating expenses: 1,940,168 1,862,152
--------- ---------
1,429,840 1,540,137
General and administrative expenses 495,720 453,471
Depreciation, amortization and depletion 239,387 193,068
--------- ---------
694,733 893,598
--------- ---------
Other income (expense):
Other income 686 1,720
Interest income 5,013 7,538
Interest expense (100,835) (116,184)
Supervisory management fees (161,550) (161,550)
--------- ---------
(256,686) 368,476
--------- ---------
Net income $ 438,047 $ 625,122
========= =========
F-15
<PAGE>
U.S. TIRE RECYCLING PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 438,047 $ 625,122
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 329,245 149,733
Amortization 168,272 -
Depletion 43,335 43,335
Changes in assets and liabilities:
Accounts receivable (213,282) (7,533)
Other receivables (61,781) 7,656
Inventory 65,256 (55,567)
Other current assets (16,019) (92,378)
Other assets 10,523 6,789
Accounts payable and accrued expenses (30,390) 28,775
Other accrued liabilities 21,607 71
Income taxes payable (31,812) (20,395)
---------- ---------
Net cash provided by operating activities 723,001 685,068
---------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment (342,886) 138,657
Repayment of loan from affiliated entity 110,781 -
---------- ---------
Loan to affiliates - (202,351)
Net cash used in investing activities (232,105) 341,008
---------- ---------
Cash flows from financing activities:
Partnership distributions (252,158) (150,000)
Proceeds from long-term debt 15,083 83,160
Payment of mortgage payable (273,810) -
Payments of long-term debt (3,166) (130,618)
---------- ---------
Net cash used in financing activities (514,051) (197,458)
---------- ---------
Net increase (decrease) in cash and cash equivalents (23,155) 146,602
Cash and cash equivalents at beginning of period 202,507 167,915
---------- ---------
Cash and cash equivalents at end of period $ 179,352 $ 314,517
========== =========
</TABLE>
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners of Waste Recovery - Illinois
(An Illinois General Partnership)
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Waste
Recovery - Illinois (An Illinois General Partnership) at December 31, 1995 and
1994, and the results of its operations and cash flows for the years then ended,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Dallas, Texas
March 27, 1996
F-17
<PAGE>
WASTE RECOVERY - ILLINOIS
(AN ILLINOIS GENERAL PARTNERSHIP)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
<S> <C>
1995 1994
---- ----
Current Assets:
Cash and cash equivalents $ 464,184 $ 2,669,079
Investments - 4,253,322
Accounts receivable, trade 125,956 -
Interest receivable 10,565 164,095
Receivable from Waste Recov
Financing for the acquisitions was provided by the issuance of common stock of
the Company, subordinated notes, and notes payable.
(c) To reflect the financing as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
WR-Illinois U.S. Tire Total
----------- ----------- -----------
Common stock $ 869,000 $ 2,261,000 $ 3,130,000
Subordinated notes - 1,850,000 1,850,000
Note payable - 486,534 486,534
</TABLE>
(d) To eliminate inter company balances between WR-Illinois and the Company.
(e) To eliminate the capital structure of WR-Illinois and U.S. Tires
P-7
