<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 1-10727
MID-AMERICAN WASTE SYSTEMS, INC.
DELAWARE 31-1161917
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
1006 WALNUT STREET, CANAL WINCHESTER, OHIO 43110
(614) 833-9155
Indicate by checkmark 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 file
requirements for the past 90 days.
Yes __X__ No _____
The number of shares outstanding of each of the issuer's classes of common stock
outstanding as of JUNE 30, 1996:
27,984,950 PAR VALUE $1.00
1
<PAGE> 2
MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1995 and
June 30, 1996 (unaudited) 3
Consolidated Statements of Operations (unaudited) for the three
and six month periods ended June 30, 1995 and 1996 4
Consolidated Statements of Cash Flows (unaudited) for the
six month periods ended June 30, 1995 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 6-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (unaudited) 12-17
PART II. OTHER INFORMATION
Other Information 18
Signatures 19
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11-Computation of Earnings Per Share 20
</TABLE>
2
<PAGE> 3
MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,602,000 $ 26,357,000
Accounts receivable, less allowances for doubtful
accounts of $409,000 and $588,000 13,723,000 13,539,000
Refundable income taxes 10,691,000 10,691,000
Other receivables 2,078,000 3,228,000
Prepaid expenses and other current assets 5,511,000 4,091,000
Assets held for sale 45,091,000
------------- -------------
Total current assets 85,696,000 57,906,000
------------- -------------
PROPERTY AND EQUIPMENT, less accumulated depreciation
and amortization of $78,582,000 and $84,221,000 355,838,000 351,824,000
------------- -------------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES, net of amortization 20,587,000 20,150,000
OTHER INTANGIBLE ASSETS, net of amortization 15,012,000 13,906,000
OTHER ASSETS 38,230,000 54,286,000
------------- -------------
73,829,000 88,342,000
------------- -------------
$ 515,363,000 $ 498,072,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,710,000 $ 8,270,000
Current maturities of notes payable and term obligations 326,309,000 314,053,000
Accrued interest, taxes and other expenses 20,848,000 44,317,000
------------- -------------
Total current liabilities 359,867,000 366,640,000
------------- -------------
DEFERRED INCOME TAXES 14,274,000 14,274,000
------------- -------------
OTHER LIABILITIES 31,539,000 31,737,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 2,000,000 shares authorized
none issued
Common stock, $1.00 par value, 50,000,000 shares authorized,
28,038,800 issued in 1995 and 1996 28,039,000 28,039,000
Additional paid-in capital 233,806,000 233,806,000
Accumulated deficit (150,704,000) (176,209,000)
------------- -------------
111,141,000 85,636,000
Deferred compensation (1,243,000)
Treasury stock, 53,850 shares, at cost (215,000) (215,000)
------------- -------------
Total stockholders' equity 109,683,000 85,421,000
------------- -------------
$ 515,363,000 $ 498,072,000
============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Collection services $ 28,053,000 $ 20,259,000 $ 55,622,000 $ 45,115,000
Landfill operations 13,254,000 11,158,000 24,877,000 19,995,000
------------ ------------ ------------ ------------
41,307,000 31,417,000 80,499,000 65,110,000
------------ ------------ ------------ ------------
EXPENSES:
Operating expenses 18,810,000 19,555,000 36,913,000 38,819,000
Depreciation and amortization 7,643,000 7,996,000 15,599,000 14,373,000
Selling, general and administrative expenses 5,188,000 5,896,000 10,099,000 10,747,000
Other (income) and expense 3,049,000 7,579,000 2,810,000 8,837,000
Interest expense 7,024,000 9,176,000 13,745,000 17,839,000
------------ ------------ ------------ ------------
41,714,000 50,202,000 79,166,000 90,615,000
------------ ------------ ------------ ------------
Income (loss) before income taxes (407,000) (18,785,000) 1,333,000 (25,505,000)
INCOME TAXES PROVISION (BENEFIT) (171,000) 550,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (236,000) $(18,785,000) $ 783,000 $(25,505,000)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE $ (.01) $ (.67) $ .03 $ (.91)
============ ============ ============ ============
Common shares and common equivalent
shares utstanding 24,976,924 27,984,950 24,879,103 27,984,950
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 783,000 $(25,505,000)
------------ ------------
Adjustments to reconcile net income (loss) from operations
to net cash provided by operating activities:
Depreciation and amortization 15,599,000 14,373,000
Deferred income taxes 1,000,000
Amortization of debt issuance and refinancing costs 723,000 754,000
Losses on sales of property and equipment 3,366,000
Other 1,030,000 890,000
Write-off and amortization of deferred compensation 1,243,000
Change in assets and liabilities, net of effects
from acquisitions (5,199,000) 10,760,000
------------ ------------
Total adjustments 16,519,000 28,020,000
------------ ------------
Cash provided by operating activities 17,302,000 2,515,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (15,105,000) (8,268,000)
Proceeds on sales of property and equipment 3,546,000 45,892,000
Additions to financial responsibility escrow fund (15,078,000)
Proceeds from collection of notes receivable 4,950,000
Other 1,311,000
------------ ------------
Cash provided by (used in) investing activities (10,248,000) 27,496,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to notes payable and term obligations 700,000
Payments of notes payable and term obligations (11,369,000) (12,256,000)
Debt issuance and refinancing costs (585,000)
------------ ------------
Cash used in financing activities (11,254,000) (12,256,000)
------------ ------------
Increase (decrease) in cash and cash equivalents (4,200,000) 17,755,000
Cash and cash equivalents, beginning of period 12,206,000 8,602,000
------------ ------------
Cash and cash equivalents, end of period $ 8,006,000 $ 26,357,000
============ ============
Supplemental schedule of non-cash investing and financing
activities:
Notes receivable received from disposition of business $ 6,100,000
============
Notes payable issued for settlement of liabilities $ 1,600,000
============
Common stock issued for settlement of liabilities $ 999,000
============
As described in Note 3 to the consolidated financial
statements, the Company acquired a certain business
In this acquisition:
Fair value of assets acquired $ 2,594,000
============
Liabilities assumed, net $ 234,000
============
Common stock issued for acquisitions $ 2,360,000
============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE> 6
MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
In connection with the Company's restructuring, the Company's
management is continuing the process of evaluating the carrying value of its
landfills and related assets for impairment and the adequacy of its accruals
related to closure and post-closure costs of the Company's operating and closed
landfills; the result of which likely will require significant additional
charges for asset impairment, asset write-downs and additional closure accruals.
Provision for these charges has not been made in the accompanying financial
statements because the evaluation process by the Company, outside engineering
consultants, and the Company's recently appointed independent accountants (see
item 5) have not been completed. However, preliminary indications are that such
charges likely will be significant and may exceed $200 million. Management
anticipates finalizing and recording such adjustments in the Third Quarter of
1996. The unaudited financial statements for the three month and six-month
periods ended June 30, 1995 and 1996 do not reflect any such adjustments.
However, during the Second Quarter of 1996 the Company recorded
approximately $10,263,000 in additional charges as part of its restructuring
process. The $10,263,000, consists of approximately $3.7 million attributable to
an increased provision for health and liability insurance accruals, $1.7 million
attributable to writing off missing or inoperable equipment, $2.3 million for
the estimated loss in fulfillment of a waste hauling and disposal contract, $2.1
million for an unfavorable lease, and $.5 million for other accruals.
The Company is in preliminary negotiations with various interested
parties regarding the sale of all or a part of the Company's operations. Any
such sale would likely result in minimal value to the existing shareholders of
the Company. The accompanying financial statements do not include any
adjustments relating to any potential sale.
The unaudited financial statements are presented in accordance with the
requirements of Form 10-Q and do not include all disclosures normally required
by generally accepted accounting principles. Reference should be made to the
Company's consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995 as
filed with the Securities and Exchange Commission for additional disclosures,
including a summary of the Company's accounting policies.
Property and Equipment:
Property and equipment at December 31, 1995 and June 30, 1996 consisted
of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
---- ----
<S> <C> <C>
Landfills $ 149,930,000 $ 152,457,000
Vehicles and equipment 92,739,000 86,952,000
Buildings, facilities and improvements 42,354,000 42,460,000
Construction in progress - landfills 2,530,000 1,908,000
Future permitted landfill capacity not constructed 148,838,000 149,239,000
Land 3,029,000 3,029,000
------------- -------------
434,420,000 436,045,000
Less accumulated depreciation and amortization (78,582,000) (84,221,000)
------------- -------------
$ 355,838,000 $ 351,824,000
============= =============
</TABLE>
6
<PAGE> 7
Interest is capitalized on landfill permitting and preparation costs
and other facility construction costs during the periods that these assets are
undergoing activities necessary for their intended use. Interest costs of
$4,809,000 and $450,000 were capitalized during the six month periods ended June
30, 1995 and 1996, respectively.
Reclassification:
Certain amounts in the 1995 financial statements have been reclassified
to conform with the 1996 presentation.
2. LIQUIDITY:
The Company's viability as a going concern is dependent upon the
restructuring of its obligations and asset base, and ultimately, a return to
profitability. In addition, as more fully described in Note 5, the Company is a
party to certain criminal charges and an SEC inquiry in connection with the Gary
landfill. The Company recorded a net loss of $182,558,000 for the year ended
December 31, 1995 and a net loss of $25,505,000 for the six month period ended
June 30, 1996, had negative working capital of $308,734,000 at June 30, 1996 and
was in default on certain debt agreements which are classified as current
liabilities in the accompanying consolidated balance sheets. If present trends
continue and the Company is unable to obtain relief or otherwise cure the events
of default, the Company may be required to seek protection under federal
bankruptcy laws.
The Company's highly leveraged capital structure precludes it from
developing any new landfills, and accordingly, at December 31, 1995 the Company
had sold or written-off all of its investments in development landfill projects.
The Company has also offered for sale various integrated landfill and collection
operations in order to raise cash for purposes of reducing its debt, and in
March 1996, consummated the sale of the assets of its Atlanta operations.
Substantially all proceeds from the sale of assets are restricted for debt
reduction by the terms of the various credit agreements.
The Company's cash provided by operating activities was approximately
$2,515,000 for the six month period ended June 30, 1996. However, the Company is
not able to borrow additional amounts under its existing credit arrangements and
does not believe that cash provided by operating activities in 1996 will be
adequate to fund both the non-discretionary capital expenditure requirements
necessary to maintain its present landfill operations as well as the scheduled
debt service requirements of its notes payable and term obligations.
Primarily as a result of the net losses experienced for the year ended
December 31,1995 and the six month period ended June 30, 1996, the Company was
not in compliance with certain financial covenants and is in default under its
unsecured bank credit agreement, Senior Notes, Senior Subordinated Notes and
certain other debt agreements at June 30, 1996. In addition, the Company did not
make the scheduled payment of approximately $10,719,000 in interest due February
15, 1996 on the Senior Subordinated Notes and the Company does not intend to
make the August 15, 1996 interest payment of $10,719,000 on the Senior
Subordinated Notes. In connection with the sale of the operating assets of the
Atlanta operations on March 26, 1996, the Company made approximately $9,500,000
in principal payments on the unsecured bank credit facility and Senior Notes and
funded approximately $1,100,000 of letters of credit. Although the lenders
consented to the Atlanta sale, and the use of the proceeds therefrom, the
Company remains in default on all of these debt arrangements and the outstanding
debt balances at December 31, 1995 and June 30, 1996 have been classified as
current liabilities.
The Company is continuing discussions with the lender groups in an
effort to finalize a satisfactory restructuring of the unsecured bank credit
agreement, the Senior Notes and the Senior Subordinated Notes. In addition, the
Company continues to pursue both additional asset sales and alternative
financing arrangements, including equity and other long term financing, which
would retire all or a portion of the outstanding senior debt. The Company
believes that, until the refinancing of the unsecured bank credit agreement and
senior notes is
7
<PAGE> 8
finalized, existing cash balances and anticipated cash receipts should be
adequate to cover operating cash disbursements and required capital
expenditures. However, if the senior lenders were to accelerate maturity, the
Company would not have sufficient funds to repay the $67,658,000 of Senior Notes
nor the $175,000,000 of Senior Subordinated Notes outstanding at June 30, 1996.
3. DIVESTITURES:
On March 26, 1996 the Company completed the sale of its northeast
Atlanta market collection operations and a landfill. These operations
represented $12,118,000 and $5,046,000 of collection services revenues and
$2,422,000 and $483,000 of landfill operations revenues during the six month
periods ended June 30, 1995 and 1996, respectively. The gross proceeds of
approximately $52,000,000, were used to repay approximately $9,500,000 of
principal and fund $1,100,000 of letters of credit under the unsecured bank
credit agreement and Senior Notes agreements, fund $21,900,000 of closure,
post-closure and performance bonding obligations and the remainder will be used
for working capital needs. The Company realized a loss on the disposition of the
entire market of $10,760,000, which was provided at December 31, 1995, including
costs related to the closure of a smaller Georgia landfill not included in the
sale transaction. In addition, the Company completed the acquisition of one
collection operation and the sales of certain collection operations, landfills
and landfill development projects between June 30, 1995 and December 31, 1995.
The following table summarizes the unaudited consolidated pro forma
results of operations, assuming the 1995 acquisition and sales of collection
operations and landfills had occurred at the beginning of 1995:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1995 1996
---- ----
(in thousands, except (loss) per share)
<S> <C> <C>
Revenues $ 65,805 $ 59,581
Net (loss) $(14,433) $(26,348)
Net (loss) per share $ ( .57) $ ( .94)
Common and common equivalent shares outstanding 25,351 27,985
</TABLE>
4. NOTES PAYABLE AND TERM OBLIGATIONS:
Notes payable and term obligations at December 31, 1995 and June 30,
1996 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
---- ----
<S> <C>
Borrowings under unsecured bank
credit agreement $ 3,132,000
8.85% Senior Notes 30,777,000 $ 28,118,000
9.23% Senior Notes 43,281,000 39,540,000
9.75% First Mortgage Revenue Bonds 13,318,000 12,999,000
4.375% Guaranteed Variable Rate
Revenue Bonds 24,400,000 24,400,000
7.75% Development Revenue Bonds 11,665,000 11,390,000
7% Guaranteed Industrial Development
Revenue Bonds 14,000,000 14,000,000
Notes payable, at an average rate of 7.9% due in
monthly and quarterly installments through 2005 10,736,000 8,606,000
12.25% Senior Subordinated Notes 175,000,000 175,000,000
------------ -----------
326,309,000 314,053,000
Less current maturities 326,309,000 314,053,000
------------ -----------
$ -0- $ -0-
============ ============
</TABLE>
8
<PAGE> 9
At December 31, 1995 and June 30, 1996, the Company was in default
under its unsecured bank credit agreement, Senior Notes Agreement and Senior
Subordinated Notes Agreement. Due to cross default provisions in the Company's
other notes payable and term obligations, the Company has classified all of its
outstanding indebtedness of $314,053,000 as a current liability at December 31,
1995 and June 30, 1996.
Stated maturities of notes payable and term obligations, had the
Company not been in default, would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1996.............................. $ 10,754,000
1997.............................. 21,882,000
1998.............................. 18,425,000
1999.............................. 14,789,000
2000.............................. 12,129,000
Thereafter........................ 236,074,000
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
In the normal course of its business, and as a result of the extensive
governmental regulation of the solid waste industry, the Company periodically
may become subject to various judicial and administrative proceedings involving
federal, state or local agencies. In these proceedings, the agency may seek to
impose fines on the Company or to revoke or deny renewal of an operating permit
held by the Company. From time to time, the Company also may be subjected to
actions brought by citizens' groups in connection with the permitting of its
landfills or transfer stations, or alleging violations of the permits pursuant
to which the Company operates. Certain federal and state environmental laws
impose strict liability on the Company for such matters as contamination of
water supplies or the improper disposal of hazardous waste. The Company's
operation of landfills subjects it to certain operational, monitoring, site
maintenance, closure and post-closure obligations which could give rise to
increased costs for monitoring and corrective measures. In connection with the
Company's acquisition of existing landfills, it is often necessary to expend
considerable time, effort and money in complying with the permitting process
necessary to increase the capacity of these landfills. Governmental authorities
have the power to enforce compliance with these regulations and to obtain
injunctions or impose fines in a case of violations. During the ordinary course
of its landfill operations, the Company may from time to time receive citations
or notices from such authorities that such operations are not in compliance with
applicable environmental regulations. Upon receipt of such citations or notices,
the Company works with the authorities in an attempt to resolve the issues
raised by such citations or notices. Failure to correct the problems to the
satisfaction of the authorities could lead to curtailed operations or even
closure of the landfill.
The Company has obtained environmental impairment liability insurance
covering claims for sudden or gradual onset environmental damage at certain
landfill sites in amounts mandated by state and federal statutes. If the Company
were to incur liability for environmental damage in excess of its insurance
limits, its financial condition could be adversely affected. The Company carries
a comprehensive general liability insurance policy which management considers
adequate to protect its assets and operations from other risks. The Company also
may be subject to claims for personal injury or property damage arising out of
motor vehicle accidents involving its trucks. The Company currently carries
insurance with policy limits which management believes to be sufficient to cover
this risk.
The Company is usually required to post a performance bond or bank
letter of credit at the time of execution of a municipal residential collection
contract and at June 30, 1996 the Company had posted approximately $28,008,000
of performance bonds for these contracts. In addition, the Company has been
required to post letters of credit or surety bonds to secure its obligations to
close its landfills in accordance with environmental regulations. At June 30,
1996, the Company had provided letters of credit totaling $7,797,000 and surety
bonds totaling $55,950,000 to secure the Company's landfill closure and
post-closure obligations. In
9
<PAGE> 10
addition, the Company has provided letters of credit totaling $11,509,000 as
security to the Company's insurance carrier and bonding company.
The Company maintains self-insurance retention limits for its insurance
coverage. Accrued self-insurance costs at December 31, 1995 and June 30, 1996
were $3,182,000 and $6,445,000 respectively.
In 1991, the Company purchased its Cuyahoga Regional Sanitary Landfill
in Cleveland, Ohio and certain collection operations pursuant to an Asset
Purchase Agreement. Under the terms of the Asset Purchase Agreement, the Company
is required to contribute fifty percent (50%) of any settlement judgment or
damage award in excess of $5,500,000 resulting from certain litigation
instituted by Browning-Ferris of Ohio, Inc. ("BFI") against the sellers of such
assets. In October 1995, a judgment was rendered in favor of BFI in such
litigation. In February 1996, the Company made a cash payment of $1,060,000 in
settlement of the litigation. In addition, the Company is required, pursuant to
the Asset Purchase Agreement, to provide payments to the sellers for additional
permitted airspace at the landfill. In 1995, the Company was granted a permit
for 753,000 additional cubic yards of airspace and therefore, the Company is
required to pay approximately $2,300,000 to the sellers which amount has been
accrued in the balance sheets at December 31, 1995 and June 30, 1996 .
In August 1990, the Company entered into an agreement with Muht-Hei,
Inc., a corporation formed by the Campo Band of Mission Indians, to design,
obtain a permit for, construct and operate a new 400-acre landfill located on
the Indians' reservation approximately 50 miles east of San Diego, California
(the "Campo Project"). In 1995, the Company determined that the Campo Project
was no longer economically feasible to continue. On July 28, 1996, the Company
finalized a settlement with Muht-Hei, Inc. that calls for payment totaling
$1,150,000, of which $555,000 has been paid through June 30, 1996 and of which
$595,000 will be paid over the next seven months. The entire amount was accrued
in the balance sheet at December 31, 1995. In addition, the Company will receive
a royalty of $.50 per ton for the life of the site, based on certain performance
criteria and is to be paid if the landfill is constructed.
In connection with the Company's expansion of the Pine Grove Landfill,
the Company was sued, in June 1996, by the Coshocton-Fairfield-Licking-Perry
Solid Waste Management District (the "Four Counties") to enjoin the completion
of such expansion on the grounds that the consent of the Four Counties, which
has not been obtained, is necessary to the completion of the expansion. The
Company is contesting the request for an injunction on the ground that such
consent is not required. The matter is scheduled for trial in August 1996. The
Company's inability to complete the expansion of the Pine Grove Landfill on a
timely basis could have a significant adverse affect on the Company.
In August 1994, the Company and a subsidiary filed suit in Lake
Superior Court for Lake County, Indiana against the City of Gary, Indiana, its
Mayor and each of its members of City Council for breach of contract, unjust
enrichment and tortious and intentional interference with contracts arising out
of Gary's failure to abide by the terms of its contract with the Company.
Subsequently, the City of Gary notified the Company that it was terminating its
contract with the Company. In September 1994, the Company filed a lawsuit
against the City of Gary in the United States District Court for the Northern
District of Indiana, Hammond Division, wherein the Company sought an injunction
against the City, prohibiting it from unlawfully using its offices to implement
its interpretation of the contractual agreement between the parties. The Federal
District Court granted a temporary restraining order in favor of the Company.
The Federal District Court later denied a preliminary injunction and dismissed
the Federal case on the basis that the Court did not have jurisdiction. The
Company appealed the decision to the 7th Circuit Court of Appeals which decided
the case on February 22, 1995. The Court of Appeals' decision affirmed the lower
court's dismissal of the suit on the grounds that there was not a violation of
the Company's due process and that the contractual right did not constitute a
"property right" which would have created a federal right to specific
performance of the contract. The Court of Appeals remanded the proceedings to
Federal District Court for findings with respect to fines due the Company from
the City related to the City's failure to comply with an injunction imposed by
the Federal District Court. The Court of Appeals also sent a copy of its opinion
to the United States Attorney for the District of Indiana so that the executive
branch may
10
<PAGE> 11
consider whether to initiate a criminal prosecution against the City for
contempt of the District Court's order and also for perjury. Upon remand of the
civil contempt fines issued to the Federal District Court, the District Court
awarded the Company $110,250 in civil fines and $11,589 in attorney fees. The
Seventh Circuit Court of Appeals on March 7, 1996 upheld this award. On July 10,
1996, the Company settled all claims against the City of Gary, Indiana, the
Mayor of Gary, Indiana, and the members of the City Council. Pursuant to the
settlement, the Company retained $2,000,000 in payments and agreed to take no
action to collect the award of civil fines and attorney fees. In addition, the
City of Gary, Indiana, the Mayor of Gary, Indiana, and the members of the City
Council agreed to drop all claims against the Company.
Investigation Related to Gary Landfill and Political Contributions. The
Company has been involved in an investigation by the United States Attorney for
the Northern District of Indiana into events that relate to the landfill in
Gary, Indiana and certain other political activities in Gary, Indiana and
elsewhere. The Company, through its former President, Mr. White, negotiated the
right to operate the Gary Landfill in 1990, and such operating agreement was
approved by the City Council, the Indiana Department of Environmental Management
and the Lake County Superior Court. The Company has responded to a number of
document subpoenas, and certain of the Company's executive officers (other than
the President) and certain other employees have been requested, and have
testified, before a federal grand jury investigating the matter. Each such
officer or employee has received a letter from the U.S. Attorney specifying that
his or her testimony has been sought "not as a subject or target of the
investigation, but as a witness to matters and events to which he has
knowledge."
The Company entered into plea negotiations with the U.S. Attorney for
the Northern District of Indiana. On April 12, 1996, the grand jury returned
indictments against Mr. White and a former vice president of the Company. The
former officers have been charged with bribery and other violations in
connection with the Company's operations in Gary, Indiana. Mr. White resigned as
an officer and director of the Company on April 12, 1996. On April 29, 1996, the
Company pled guilty to a criminal misdemeanor charge involving campaign
contributions, and its subsidiary that ran the Gary Landfill pled nolo
contendere to a charge under Title 18 U.S.C., Section 666(a)(2) involving
payments to an agent of the City of Gary. The Company believes that it has
accrued an adequate amount for penalties that will be assessed.
SEC Inquiry. The Company has been contacted by the Securities and
Exchange Commission regarding a matter under inquiry related to the Gary
investigation discussed above and has provided documentation to the SEC related
to the Gary Landfill operations and political contributions.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
The following table presents, for the periods indicated, the percentage
relationship which the various items bear to total revenues and the percentage
increase (decrease) in the dollar amounts of such items:
<TABLE>
<CAPTION>
Percentage Relationship Period-to-Period
To Total Revenues Change
----------------- ------
Six Months Ended Six Months Ended
June 30, June 30,
-------- --------
1995 1996 1996 vs. 1995
---- ---- -------------
Revenue:
<S> <C> <C> <C>
Collection services 69.1% 69.3% (18.8)%
Landfill operations 30.9 30.7 (19.6)
------ ------ --------
Total revenues 100.0 100.0 (19.1)
------ ------ --------
Expenses:
Operating expenses 45.9 59.6 5.2
Depreciation and amortization 19.4 22.0 (7.9)
Selling, general and
administrative expenses 12.5 16.5 6.4
Other (income) and expense 3.4 13.6 214.5
Interest expense 17.1 27.4 29.8
------ ------ --------
Total expenses 98.3 139.1 14.5
------ ------ --------
Income (loss) before income taxes 1.7 (39.1) (2,013.3)
Income taxes 0.7 0.0 100.0
------ ------ --------
Net income (loss) 1.0% (39.1)% (3,357.3)%
====== ====== ========
</TABLE>
12
<PAGE> 13
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Revenues. Total revenues decreased 19.1% from $80,499,000 in 1995 to
$65,110,000 in 1996. This decrease was primarily the result of the divestiture
of certain collection and landfill operations and overall reductions in the
amount of third party waste disposed of at Company-owned landfills.
The 1996 net changes in components of collection services revenues are
as follows:
<TABLE>
<S> <C>
1995 Collection services revenues ............................ $55,622,000
-----------
Net changes in components of revenue:
Divestitures ............................................. (7,925,000)
Acquisitions.............................................. 700,000
Volume.................................................... (3,461,000)
Price..................................................... 179,000
-----------
Net decrease.......................................... (10,507,000)
-----------
1996 Collection services revenues ........................... $ 45,115,000
-----------
</TABLE>
Collection services revenues decreased 18.9% from $55,622,000 in 1995
to $45,115,000 in 1996. Divestitures of collection operations subsequent to June
30, 1995 reduced 1996 revenues by $7,925,000. During 1995, the Company completed
the acquisition of an integrated collection business located in the Clarksburg,
West Virginia market. This acquisition represented incremental collection
services revenue of $700,000 from 1995 to 1996. Price increases subsequent to
June 30, 1995 increased collection services revenue by $179,000. Competitive
pressures continued to be a significant factor, and the Company experienced
volume decreases of $3,461,000. This decrease was a result of overall volume
decreases in its northeast Atlanta market, which was sold on March 26, 1996, a
drop in industrial volumes, primarily in its Cleveland market, and the loss of
several residential municipal contracts, primarily in the Parkersburg, West
Virginia market.
The 1996 net changes in components of landfill operations revenues are
as follows:
<TABLE>
<S> <C>
1995 Landfill operations revenues ........................... $ 24,877,000
------------
Net changes in components of revenue:
Divestiture/Closure....................................... (1,951,000)
Volume.................................................... (2,970,000)
Price..................................................... 39,000
------------
Net decrease.......................................... (4,882,000)
------------
1996 Landfill operations revenues ........................... $ 19,995,000
------------
</TABLE>
Landfill operations revenues decreased 19.6% from $24,877,000 in 1995
to $19,995,000 in 1996. Landfill operations revenues were adversely affected by
overall volume decreases of third-party waste deposited in Company-owned and
operated landfills. The volumes of third-party waste deposited in Company-owned
and operated landfills decreased 192,000 tons from 1,450,000 tons in 1995 to
1,258,000 in 1996. The Company expects the trend of decreasing landfill volumes
to continue due to the anticipated 1996 closure of the Company's Cuyahoga
Regional Sanitary Landfill and the loss of a large landfill contract at the
Company's RCC landfill. The average tipping fee charged per ton at the Company's
landfills which are currently in operation increased to $15.51 in 1996 from
$15.49 in 1995.
13
<PAGE> 14
Operating Expenses. Operating expenses increased 5.2% from $36,913,000
in 1995 to $38,819,000 in 1996 and represented 45.9% of total revenues in 1995
compared to 59.6% of total revenues in 1996. These dollar and percentage
increases are primarily due to increased repair and maintenance expense during
the first half of 1996 to properly maintain the Company's fleet of collection
vehicles.
Depreciation and Amortization. Depreciation and amortization decreased
$1,226,000 or 7.9% from $15,599,000 in 1995 to $14,373,000 in 1996. These
expenses represented 19.4% and 22.0% of total revenues in 1995 and 1996,
respectively. Depreciation and amortization decreased due to decreased landfill
amortization of $1,677,000, from $5,827,000 in 1995 to $4,150,000 in 1996. This
decrease of landfill amortization is due to decreased volumes of third-party
waste deposited in Company-owned and operated landfills of 192,000 tons from
1995 to 1996. Landfills and landfill acquisition costs are depleted on the
unit-of-production method, which is calculated on the basis of the relationship
between the amount of permitted airspace in the landfills and the amount of that
airspace filled during a particular period. Thus, depreciation and amortization
attributable to landfills will vary with changes in the volume of waste
deposited in and the permitted life of the landfills.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 6.4%, increasing $648,000 from $10,099,000 in
1995 to $10,747,000 in 1996. These expenses represented 12.5% and 16.5% of total
revenues in 1995 and 1996, respectively. The increase in 1996 is primarily
attributable to an increase in professional fees incurred relative to the Gary,
Indiana investigation, as well as the possible sale or a restructuring of the
Company. The Company anticipates that these costs will continue through the
remainder of the year.
Other Expenses. Other expenses increased $6,027,000 from $2,810,000 in
1995 to $8,837,000 in 1996, and represented 3.4% and 13.6% of total revenues in
1995 and 1996, respectively. Other expenses for 1996 include a charge of
$1,209,000 for the write-off of the unamortized balance of deferred compensation
for restricted stock issued in 1993 to Christopher L. White and Dennis P.
Wilburn, former executive officers of the Company who resigned during March 1996
and April 1996, respectively; severance costs of $275,000, including employee
termination and benefit costs, were recorded by the Company during 1996 for
certain employees of the Company. In addition, $2,299,000 was provided for an
unfavorable hauling and disposal contract in Cleveland, Ohio; $2,100,000 for an
unfavorable lease and $3,602,000 to fully accrue for the Company's self
insurance program. Interest income of approximately $1,000,000 was recorded
during the period.
Interest Expense. Interest expense increased 29.8% from $13,745,000 in
1995 to $17,839,000 in 1996. Interest expense represented 17.1% and 27.4% of
total revenues in 1995 and 1996, respectively. These dollar and percentage
increases resulted from a decrease of capitalized interest of $4,359,000, from
$4,809,000 in 1995 to $450,000 in 1996 as the Company suspended the
capitalization of interest on certain projects not undergoing development
activities necessary for their intended use. The Company expects this trend of
lower interest capitalization to continue.
Other Income Statement Items. The provision for income taxes resulted
in effective tax rates for 1995 of 41.4%. The Company did not record a provision
for income taxes during 1996 due to the net loss recorded by the Company during
1996 as well as the uncertainty of future taxable income. Differences between
the actual tax expense and the statutory Federal tax rate were due primarily to
provisions for state income taxes, net of the Federal tax benefit, the
nondeductibility for tax purposes of goodwill associated with certain collection
operation acquisitions, and a significant valuation allowance recorded against
the Company's deferred tax asset.
For the reasons discussed above, the Company had a net loss of
$25,505,000 in 1996 compared to net income of $783,000 in 1995.
14
<PAGE> 15
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on the Company's
operations. The Company believes it may be able to pass through to its customers
most cost increases resulting from inflation. However, competitive factors may
require the Company to absorb at least a portion of these cost increases,
particularly during prolonged periods of economic slowdown.
ENVIRONMENTAL AND REGULATORY MATTERS
In 1991, the United States Environmental Protection Agency (the "EPA")
promulgated Solid Waste Disposal Facility Criteria for landfills under Subtitle
D of The Resource Conservation and Recovery Act of 1976 ("Subtitle D
Regulations"). The EPA's Subtitle D Regulations include location standards,
financial assurance standards, groundwater monitoring as well as corrective
action standards. The Subtitle D Regulations became effective for most landfills
on October 9, 1993, with a phase-in period for certain provisions. Additionally,
as a result of Subtitle D Regulations and various state statutes, the Company is
required to maintain landfill sites for mandated periods after closure. The
Company records an accrual (other liabilities) and a charge to operating expense
for estimated post-closure costs over the operating life of the landfills as the
airspace is filled. Accruals for closure and post-closure monitoring and
maintenance activities, which are based on engineers' estimates, cover
expenditures to be incurred after the landfills stop accepting waste. Such
expenditures include a final cap and cover for the site, methane gas and
leachate management and groundwater monitoring. The Company updates engineering
estimates for closure and post-closure costs periodically during the year to
reflect current, as well as future, requirements and proposed regulatory
changes. All of the Company's owned and operated landfills, planned landfill
expansions or new landfill development projects are being engineered to meet or
exceed these requirements.
The Company is responsible for closure and post-closure monitoring and
maintenance costs at its twelve operating landfills and ten closed landfills.
Estimated aggregate closure and post-closure costs are to be fully accrued for
the landfill sites at the time the landfills cease to accept waste and are
closed. At June 30, 1996, the Company is reviewing the closure and post-closure
costs (See Footnote 1). At June 30, 1996, the Company had accrued $20,955,000
for closure and $5,101,000 for post-closure.
In 1993, the Company substantially completed an extensive capital
expenditure program which (i) significantly increased the Company's disposal
capacity and (ii) brought its landfills into substantial compliance with federal
and state requirements and regulations. As a result, the costs of certain
monitoring systems, which are not currently required to be in compliance with
Subtitle D Regulations (i.e., ground monitoring wells), have already been
incurred by the Company as part of the costs of new expansion permits, and
therefore are not part of the closure and post-closure costs accruals. In
addition, none of the Company's landfills (operating or closed) are connected
with Superfund National Priority Lists or potentially responsible party issues.
The EPA has issued regulations that implement certain requirements of
the 1990 amendments to the Clean Air Act. The Clean Air Act provides for
regulation of the emission of air pollutants from certain landfills based upon
the date of the landfill construction and volume per year of regulated
emissions.
In connection with the construction and expansion of the Company's
landfills, it has attempted to comply with the requirements of the Clean Air Act
and has made capital expenditures relating to these facilities. The Company does
not anticipate that operating costs will increase significantly as a result of
complying with the Clean Air Act and the regulations promulgated thereunder.
Management believes that the aforementioned environmental matters will
not have a material adverse effect on the financial condition of the Company.
However, the Company's operation of landfills subjects it to certain
operational, monitoring, site maintenance, closure and post-closure obligations
which could give rise to increased costs for monitoring and corrective measures.
The Company has instituted programs to promote
15
<PAGE> 16
compliance with federal, state and local laws, regulations and permit
requirements at each of its owned and operated landfills, and the Company
continues its efforts to anticipate and respond to future regulatory, legal and
permitting developments. The Company cannot predict the effect of any future
enacted federal or state legislation or regulations on the Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements consist principally of working
capital, payments of principal and interest on its outstanding indebtedness and
capital expenditures. During 1996, the Company's working capital deficit
increased $34,563,000 from $274,171,000 at December 31, 1995 to $308,734,000 at
June 30, 1996. The Company's cash and cash equivalents balance increased
$17,755,000 from $8,602,000 at December 31, 1995 to $26,357,000 at June 30,
1996. The 1996 cash and cash equivalents increases was primarily attributable to
the effects of the sale of the Company's northeast Atlanta market on March 26,
1996 which resulted in proceeds of approximately $52,000,000. The working
capital deficits at December 31, 1995 and June 30, 1996 represent the
reclassification of all of the Company's notes payable and term obligations to a
current liability. See-Cash Flow from Investing Activities.
Cash Flow from Operating Activities. During 1995 and 1996, net cash
provided by operating activities was $17,302,000 and $2,515,000, respectively.
Cash Flow from Investing Activities. During 1995 and 1996, the Company
made expenditures of approximately $15,105,000 and $8,268,000, respectively, for
property and equipment additions. The Company also sold certain collection
operations, property and equipment for proceeds of $48,819,000 in 1996. There
were no dispositions of property and equipment during 1995. The Company's
unsecured bank credit agreement and Senior Notes agreements provide for
limitations on aggregate capital expenditures and acquisitions, as well as
capital expenditure limitations for specific development projects. The Company
expects cash capital expenditures of approximately $20,000,000 (excluding
capitalized interest costs) during 1996 for existing landfill expansion, new
facility construction and equipment additions.
Cash Flow from Financing Activities. The Company's unsecured bank
credit agreement provides for borrowings up to $44,500,000. During March 1996,
the Company repaid the outstanding principal balance of $3,132,000 and funded
$1,100,000 of letters of credit under the credit agreement. At June 30, 1996,
the Company utilized $44,300,000 of the facility for letters of credit, leaving
$200,000 of available borrowing capacity under the facility. The Company is in
default under the agreement, and the Company does not currently anticipate that
additional borrowings will be available thereunder. As a result, the Company
will be required to support additional closure, post-closure or other stand-by
obligations with surety bonds to the extent available under its bonding program,
or by cash collateralization. Subsequent to June 30, 1995, the Company was
required to cash collateralize approximately $11,500,000 of such obligations. At
June 30, 1996, the Company had provided various regulatory authorities with
surety bonds of $55,950,000 for landfill closure and post closure obligations.
The Company's current financial position limits its ability to obtain surety
bonds or performance bonds without cash collateralization.
During 1996, the Company made debt reductions, including principal
repayments of $5,856,000 of its unsecured bank credit agreement and other notes
payable and term obligations and on April 1, 1996, the Company made a $6,400,000
principal repayment on its 8.85% and 9.23% Senior Notes.
The Company continues to actively pursue various alternatives to
reduce its notes payable and term obligations, including strategic dispositions
of certain assets with proceeds therefrom used to repay notes payable and term
obligations. On March 26, 1996, the Company completed the sale of its northeast
Atlanta market collection operations and a landfill to Republic Industries.
These operations represented $5,046,000 or 11.2% and $483,000 or 2.4% of total
collection services revenues and landfill operations revenues, respectively,
during 1996. The gross proceeds of approximately $52,000,000, subject to certain
holdbacks and contingencies, were
16
<PAGE> 17
used by the Company to (i) repay approximately $9,500,000 of principal and fund
$1,100,000 of letters of credit under the unsecured bank credit agreement and
Senior Notes agreements, (ii) cash collateralize approximately $6,800,000 of the
Company's municipal and landfill bonding facilities, and (iii) fund closure and
post-closure obligations of approximately $15,100,000 for certain of the
Company's landfills. The balance of the proceeds will be utilized by the Company
for working capital and operating expenses.
At June 30, 1996, the Company was in default under its unsecured bank
credit agreement, Senior Notes agreements and Senior Subordinated Notes
agreement. Due to cross default provisions in the Company's other notes payable
and term obligations, the Company has classified all of its outstanding
indebtedness at June 30, 1996 as a current liability. The Company has failed to
pay the February 15, 1996 installment (and will not pay the August 15, 1996
installment) of interest due on its Senior Subordinated Notes. Other defaults
may exist under its other debt instruments. As a result, the holders of such
debt instruments have the right to accelerate the maturity of their debt
instruments or to take other remedies. No assurance can be given that the
lenders will not accelerate the maturity under these debt instruments at any
time. If such debt instruments were accelerated, the Company does not currently
have sufficient cash or other resources to repay such debt.
The Company's viability as a going concern is dependent upon the
restructuring of its obligations and asset base, and ultimately, a return to
profitability. During the second quarter of 1996, the Company continued to
experience declining landfill pricing and volume, and has lost a significant
disposal contract in its Pennsylvania market. In light of these factors, the
Company intends to undertake a comprehensive review of the carrying value of all
of its assets and their related future obligations, the results of which could
require the recognition of additional asset impairment charges.
As more fully described in Note 5 to the Company's Consolidated
Financial Statements, the Company has pled to certain criminal charges in
connection with its Gary landfill and is the subject of an SEC inquiry. The
Company recorded a net loss of $182,558,000 for the year ended December 31, 1995
and a net loss of $25,505,000 for the six month period ended June 30, 1996, had
negative working capital of $308,734,000 at June 30, 1996 and was in default on
certain debt agreements which are classified as current liabilities in the
Company's balance sheet. If present trends continue and the Company is unable to
obtain relief or otherwise cure the events of default, the Company may be
required to seek protection under federal bankruptcy laws.
Provided the debtholders do not accelerate payment of such debt,
management believes that cash from operating activities, cash on hand and income
tax refunds together with proceeds from the sale of its northeast Atlanta market
operations will be sufficient to (i) meet its planned 1996 capital expenditures
of $20,000,000, (ii) meet its 1996 operating cash requirements, (iii) meet its
1996 closure and post-closure obligations, and (iv) meet its 1996 interest
payments (although the Company is not currently paying all such interest). The
Company's debt maturity schedule for 1996 is $314,053,000 due to the
aforementioned defaults. The Company does not have the capital resources to meet
its 1996 required principal payments for its notes payable and term obligations.
17
<PAGE> 18
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The information presented in Note 5 of Notes to Consolidated
Financial Statements (Part I, Item 1) is incorporated by reference in
response to this Item.
Item 2. Changes in Securities - Inapplicable
Item 3. Defaults Upon Senior Securities - Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders - Inapplicable
Item 5. Other Information
(A) Changes in Registrant's Certifying Accountants
On August 5, 1996 the Company engaged Deloitte & Touche LLP as its
independent accountants. During the Company's two years ended
December 31, 1995 and the interim period from January 1, 1996 to
August 4, 1996 the Company did not consult with Deloitte & Touche LLP
regarding the application of accounting principles, type of audit
opinion or any other reportable event.
(B) Resignation of Chief Financial Officer
On July 1, 1996, Richard A. Widders, Jr. Resigned as the secretary
and the chief financial and accounting officer of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule (contained in EDGAR filing
only)
(b) Reports on Form 8-K
On May 23, 1996, the Company filed a Form 8-K under
Item 4, "Changes in Registrant's Certifying
Accountant".
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-AMERICAN WASTE SYSTEMS, INC.
(Registrant)
Date: August 14, 1996 By: Gene A. Meredith
--------------- ----------------------
Gene A. Meredith
Chairman of the Board, President,
and Chief Executive Officer
Date: August 14, 1996 By:
--------------- ----------------------
19
<PAGE> 1
EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1995 1996 1995 1996
---- ---- ---- ----
Weighted Average Shares Outstanding:
- ------------------------------------
<S> <C> <C> <C> <C>
Common shares outstanding 25,467,303 27,984,950 25,467,303 27,984,950
at end of period ============ ============ =========== ============
Effect of using weighted average (490,379) (588,200)
common and common stock
equivalent shares outstanding
Weighted number of common shares 24,976,924 27,984,950 24,879,103 27,984,950
outstanding ============ ============ =========== ============
NET INCOME (LOSS) $ (236,000) $(18,785,000) $ 783,000 $(25,505,000)
============ ============ =========== ============
NET INCOME (LOSS) PER SHARE $ (.01) $ (.67) $ .03 $ (.91)
============ ============ =========== ============
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 26,357,000
<SECURITIES> 0
<RECEIVABLES> 14,127,000
<ALLOWANCES> 588,000
<INVENTORY> 0
<CURRENT-ASSETS> 57,906,000
<PP&E> 436,045,000
<DEPRECIATION> 84,221,000
<TOTAL-ASSETS> 498,072,000
<CURRENT-LIABILITIES> 366,640,000
<BONDS> 314,053,000
<COMMON> 0
0
28,039,000
<OTHER-SE> 57,382,000
<TOTAL-LIABILITY-AND-EQUITY> 498,072,000
<SALES> 0
<TOTAL-REVENUES> 65,110,000
<CGS> 0
<TOTAL-COSTS> 90,615,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 409,000
<INTEREST-EXPENSE> 17,839,000
<INCOME-PRETAX> (25,505,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,505,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,505,000)
<EPS-PRIMARY> (.91)
<EPS-DILUTED> (.91)
</TABLE>
