<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: September 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 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
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 SEPTEMBER 30, 1996:
27,984,950 PAR VALUE $1.00
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MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1995 and
September 30, 1996 (unaudited) 3
Consolidated Statements of Operations (unaudited) for the three
and nine month periods ended September 30, 1995 and 1996 4
Consolidated Statements of Cash Flows (unaudited) for the
nine month periods ended September 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, SEPTEMBER 30,
1995 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,602,000 $ 26,614,000
Accounts receivable, less allowances for doubtful
accounts of $409,000 and $2,028,000 13,723,000 12,064,000
Refundable income taxes 10,691,000 323,000
Other receivables 2,078,000 1,702,000
Prepaid expenses and other current assets 5,511,000 3,754,000
Assets held for sale 45,091,000 -0-
------------- -------------
Total current assets 85,696,000 44,457,000
------------- -------------
PROPERTY AND EQUIPMENT, less accumulated depreciation,
amortization and asset impairment charges
of $121,085,000 and $316,650,000 355,838,000 164,364,000
------------- -------------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES, net of amortization 20,587,000 19,927,000
OTHER INTANGIBLE ASSETS, net of amortization 15,012,000 13,384,000
OTHER ASSETS 38,230,000 54,734,000
------------- -------------
73,829,000 88,045,000
------------- -------------
$ 515,363,000 $ 296,866,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (Deficit)
CURRENT LIABILITIES:
Accounts payable $ 12,710,000 $ 6,941,000
Current maturities of notes payable and term obligations 326,309,000 312,870,000
Accrued interest, taxes and other expenses 20,848,000 48,390,000
------------- -------------
Total current liabilities 359,867,000 368,201,000
------------- -------------
DEFERRED INCOME TAXES 14,274,000 14,274,000
------------- -------------
OTHER LIABILITIES 31,539,000 99,026,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Deficit):
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) (446,265,000)
------------- -------------
111,141,000 (184,420,000)
Deferred compensation (1,243,000) -0-
Treasury stock, 53,850 shares, at cost (215,000) (215,000)
------------- -------------
Total stockholders' equity (Deficit): 109,683,000 (184,635,000)
------------- -------------
$ 515,363,000 $ 296,866,000
============= =============
</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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Collection services $ 26,710,000 $ 19,274,000 $ 82,332,000 $ 64,389,000
Landfill operations 13,295,000 10,269,000 38,172,000 30,264,000
------------ ------------- ------------ -------------
40,005,000 29,543,000 120,504,000 94,653,000
------------ ------------- ------------ -------------
EXPENSES:
Operating expenses 18,057,000 21,135,000 54,970,000 59,954,000
Depreciation and amortization 7,736,000 5,497,000 23,335,000 19,870,000
Selling, general and administrative expenses 5,064,000 7,104,000 15,163,000 17,851,000
Other expense 16,619,000 255,391,000 19,429,000 264,228,000
Interest expense 7,472,000 9,552,000 21,217,000 27,391,000
------------ ------------- ------------ -------------
54,948,000 298,679,000 134,114,000 389,294,000
------------ ------------- ------------ -------------
Loss before income taxes (14,943,000) (269,136,000) (13,610,000) (294,641,000)
INCOME TAXES PROVISION (BENEFIT) (6,276,000) 921,000 (5,726,000) 921,000
------------ ------------- ------------ -------------
NET LOSS $ (8,667,000) $(270,057,000) $ (7,884,000) $(295,562,000)
============ ============= ============ =============
NET LOSS PER SHARE $ (.32) $ (9.65) $ (.31) $ (10.56)
============ ============= ============ =============
Common shares and common equivalent shares
outstanding 27,168,120 27,984,950 25,525,892 27,984,950
============ ============= ============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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MID-AMERICAN WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (7,884,000) $(295,562,000)
------------- -------------
Adjustments to reconcile net loss from operations
to net cash provided by operating activities:
Depreciation and amortization 24,400,000 19,870,000
Deferred income taxes (3,752,000) -0-
Amortization of debt issuance and refinancing costs 1,194,000 1,131,000
Write down or impairment of projects, property and equipment 12,506,000 185,998,000
Provision for Closure, Post-Closure 1,508,000 71,134,000
Losses on sales of property and equipment 7,782,000 -0-
Write-off and amortization of deferred compensation -0- 1,243,000
Other 545,000
Change in assets and liabilities, net of effects
from acquisitions (16,431,000) 24,127,000
------------- -------------
Total adjustments 27,752,000 303,503,000
------------- -------------
Cash provided by operating activities 19,868,000 7,941,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (21,722,000) (12,163,000)
Proceeds on sales of property and equipment 6,900,000 46,004,000
Additions to financial responsibility escrow fund (15,290,000)
Proceeds from collection of notes receivable 4,950,000
Other 316,000
------------- -------------
Cash provided by (used in) investing activities (14,506,000) 23,501,000
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to notes payable and term obligations 700,000 -0-
Payments of notes payable and term obligations (13,104,000) (13,430,000)
Debt issuance and refinancing costs (600,000) -0-
Proceeds from issuance of common stock 10,307,000 -0-
------------- -------------
Cash used in financing activities (2,697,000) (13,430,000)
------------- -------------
Increase (decrease) in cash and cash equivalents 2,665,000 18,012,000
Cash and cash equivalents, beginning of period 12,206,000 8,602,000
------------- -------------
Cash and cash equivalents, end of period $ 14,871,000 $ 26,614,000
============= =============
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
SEPTEMBER 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
In connection with the Company's restructuring, the Company's management
evaluated the carrying value of its operating assets (primarily Landfill and
Transfer Stations) for impairment and the adequacy of its accruals related to
closure and post-closure costs of the Company's operating and closed landfills.
Accordingly, in the quarter ended September 30, 1996 the Company recorded total
charges of approximately $256 million, of which $186 millions was for asset
impairments and $70 million for additional closure and post-closure costs.
The provision for asset impairments was based on management's evaluation
of estimated future revenues and expenses related to its operating assets
compared to the Company's recorded net book value for such assets. The
provision for closure and post-closure landfill costs was determined by
management with the assistance of an outside engineering consulting firm. A
portion of the third quarter 1996 charges may relate to prior historical
periods, however, management is unable to determine the amounts, if any, and
periods to which such adjustments may relate.
The Company continues negotiations regarding the sale of all or a part of
the Company's operations. Any such sale would likely result in minimal, if any,
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 disclosure 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 September 30, 1996
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
---- ----
<S> <C> <C>
Landfills $ 192,433,000 $ 195,333,000
Vehicles and equipment 92,739,000 87,135,000
Buildings, facilities and improvements 42,354,000 42,402,000
Construction in progress - landfills 2,530,000 1,973,000
Future permitted landfill capacity not constructed 143,838,000 151,142,000
Land 3,029,000 3,029,000
------------- -------------
476,923,000 481,014,000
Less accumulated depreciation and amortization
and asset impairment charges (121,085,000) (316,650,000)
------------- -------------
$ 355,838,000 $ 164,364,000
============= =============
</TABLE>
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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
$6,659,000 and $478,000 were capitalized during the nine month periods ended
September 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 $295,562,000 for the nine month
period ended September 30, 1996, had negative working capital of $323,744,000
and a negative stockholders equity of $184,635,000 at September 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 will likely 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
$7,941,000 for the nine month period ended September 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 nine month period ended September 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 September 30, 1996. In
addition, the Company did not make either of the scheduled payments, of
approximately $10,719,000 each in interest due February 15, 1996 and August 15,
1996, 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
September 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
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<PAGE> 8
finalized, existing cash balances and anticipated cash receipts should be
adequate to cover operating cash disbursements and required capital expenditures
and bonding requirements. 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
September 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
$17,893,000 and $5,102,000 of collection services revenues and $3,589,000 and
$443,000 of landfill operations revenues during the nine month periods ended
September 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>
NINE MONTHS ENDED SEPTEMBER 30,
1995 1996
---- ----
(in thousands, except (loss) per share)
<S> <C> <C>
Revenues $ 98,582 $ 89,108
Net (loss) $(20,685) $(296,199)
Net (loss) per share $ (.80) $ (10.58)
Common and common equivalent shares outstanding 25,789 27,985
</TABLE>
4. NOTES PAYABLE AND TERM OBLIGATIONS:
Notes payable and term obligations at December 31, 1995 and September 30,
1996 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
---- ----
<S> <C> <C>
Borrowings under unsecured bank
credit agreement $ 3,132,000 $ -0-
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 12,443,000
4.375% Guaranteed Variable Rate
Revenue Bonds 24,400,000 24,400,000
7.75% Development Revenue Bonds 11,665,000 11,107,000
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 8,262,000
12.25% Senior Subordinated Notes 175,000,000 175,000,000
------------ ------------
326,309,000 312,870,000
Less current maturities 326,309,000 312,870,000
------------ ------------
$ -0- $ -0-
============ ============
</TABLE>
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<PAGE> 9
At December 31, 1995 and September 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 $326,309,000 and $312,870,000 as a current
liability at December 31, 1995 and September 30, 1996, respectively.
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........................................ $ 9,973,000
1997........................................ 22,029,000
1998........................................ 18,425,000
1999........................................ 14,789,000
2000........................................ 12,129,000
Thereafter.................................. 235,525,000
</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 September 30, 1996 the Company had posted approximately
$28,600,000 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 September 30, 1996, the Company had provided letters of credit
totaling
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<PAGE> 10
$7,797,000 and surety bonds totaling $55,950,000 to secure the
Company's landfill closure and post-closure obligations. In addition, the
Company has provided letters of credit totaling $11,510,000 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 September 30,
1996 were $3,182,000 and $5,815,000 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 September 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 September 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 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 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
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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
----------------- ------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1996 1996 VS. 1995
---- ---- -------------
<S> <C> <C> <C>
Revenue:
Collection services 68.3% 68.0% (21.8)%
Landfill operations 31.7 32.0 (20.7)
----- ------ ------
Total revenues 100.0 100.0 (21.5)
----- ------ ------
Expenses:
Operating expenses 45.6 63.3 9.1
Depreciation and amortization 19.4 21.0 (14.8)
Selling, general and
administrative expenses 12.6 18.9 17.7
Other (income) and expense 16.1 279.2 1260.0
Interest expense 17.6 28.9 29.1
----- ------ ------
Total expenses 111.3 411.3 190.3
----- ------ ------
Income (loss) before income taxes (11.3) (311.3) 2064.9
Income taxes (benefit) (4.8) 1.0 N/A
----- ------ ------
Net income (loss) (6.5)% (312.3)% 3648.9%
===== ====== ======
</TABLE>
12
<PAGE> 13
RESULTS OF OPERATIONS
1996 Compared to 1995
Revenues. Total revenues decreased 21.5% from $120,504,000 in 1995 to
$94,653,000 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.................................. $82,332,000
-----------
Net changes in components of revenue:
Divestitures.................................................. (13,985,000)
Acquisitions.................................................. 710,000
Volume........................................................ (4,720,000)
Price......................................................... 52,000
-----------
Net decrease.............................................. (17,943,000)
-----------
1996 Collection services revenues.................................. $64,389,000
-----------
</TABLE>
Collection services revenues decreased 21.8% from $82,332,000 in 1995 to
$64,389,000 in 1996. Divestitures of collection operations subsequent to
September 30, 1995 reduced 1996 revenues by $13,275,000. 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 $710,000 from 1995 to 1996. Price
increases subsequent to September 30, 1995 increased collection services
revenue by $52,000. Competitive pressures continued to be a significant factor,
and the Company experienced volume decreases of $4,720,000. 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 and Cleveland, Ohio markets.
The 1996 net changes in components of landfill operations revenues are as
follows:
<TABLE>
<S> <C>
1995 Landfill operations revenues................................... $38,172,000
-----------
Net changes in components of revenue:
Divestiture/Closure............................................ (3,755,000)
Volume......................................................... (5,191,000)
Price.......................................................... 1,038,000
-----------
Net decrease............................................... (7,908,000)
-----------
1996 Landfill operations revenues................................... $30,264,000
-----------
</TABLE>
Landfill operations revenues decreased 20.7% from $38,172,000 in 1995 to
$30,264,000 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 335,000 tons from 2,188,000 tons in 1995 to
1,853,000 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
13
<PAGE> 14
landfill. The average tipping fee charged per ton at the Company's landfills
which are currently in operation increased to $16.06 in 1996 from $15.50 in
1995.
Operating Expenses. Operating expenses increased 9.1% from $54,970,000 in
1995 to $59,954,000 in 1996 and represented 45.6% of total revenues in 1995
compared to 63.3% of total revenues in 1996. These dollar and percentage
increases are primarily due to increased repair and maintenance expense during
1996 in order to properly maintain the Company's fleet of collection vehicles,
and increased outside disposal due to the impending closing of the Cuyahoga
Landfill.
Depreciation and Amortization. Depreciation and amortization decreased
$3,465,000 or 14.8% from $23,335,000 in 1995 to $19,870,000 in 1996. These
expenses represented 19.4% and 21.0% of total revenues in 1995 and 1996,
respectively. Depreciation and amortization decreased due to decreased volumes
of third-party waste deposited in Company-owned and operated landfills of
335,000 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 17.7%, increasing $2,688,000 from $15,163,000
in 1995 to $17,851,000 in 1996. These expenses represented 12.6% and 18.9% 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. In addition, during the third
quarter there was an increase in the allowance for doubtful accounts of
$1,440,000.
Other Expenses. Other expenses increased $244,799,000 from $19,429,000 in
1995 to $264,228,000 in 1996, and represented 16.1% and 279.2% of total
revenues in 1995 and 1996, respectively. Other expenses for 1996 include
landfill impairment charges of $177,000,000, increased closure and post-closure
accruals of $70,000,000, impairment of a transfer station and an office
building totaling $9,000,000 and provisions for an unfavorable contract ($2.3
million), an unfavorable lease ($2.1 million) and to fully accrue the Company's
self insurance ($3 million) expense.
Interest Expense. Interest expense increased 29.1% from $21,217,000 in 1995
to $27,391,000 in 1996. Interest expense represented 17.6% and 28.9% of total
revenues in 1995 and 1996, respectively. These dollar and percentage increases
resulted from a decrease of capitalized interest of $6,181,000, from $6,659,000
in 1995 to $478,000 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 credit for 1995 of 42.1%. The Company's provision for income
taxes during 1996 is for state income taxes that will be payable due to
profitable operations at some of the Company's subsidiaries and as a result of
state tax audits. 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 non-deductibility 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
$295,562,000 in 1996 compared to net loss of $7,884,000 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 September 30, 1996, the Company has reviewed the closure and
post-closure costs (See Footnote 1). At September 30, 1996, the Company had
accrued $31,623,000 for closure and $67,403,000 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
$49,573,000 from $274,171,000 at December 31, 1995 to $323,744,000 at September
30, 1996. The Company's cash and cash equivalents balance increased $18,012,000
from $8,602,000 at December 31, 1995 to $26,614,000 at September 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 September 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 $19,868,000 and $7,941,000, respectively.
Cash Flow from Investing Activities. During 1995 and 1996, the Company
made expenditures of approximately $21,700,000 and $12,200,000, 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 September 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 September 30, 1995, the Company was required to cash collateralize
approximately $12,855,000 of such obligations. At September 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 $7,030,000 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 $5,102,000 or 7.9% and $443,000 or
1.5% 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 September 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 September 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 1996, the Company continues 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
$295,562,000 for the nine month period ended September 30, 1996, had negative
working capital of $323,744,000 at September 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 debt holders 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
$312,870,000 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
<TABLE>
<S> <C>
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".
</TABLE>
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: November 14, 1996 By: /s/ Gene A. Meredith
---------------------
Gene A. Meredith
Chairman of the Board, President,
and Chief Executive Officer
19
<PAGE> 1
EXHIBIT 11
STATEMENT OF COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding:
- ------------------------------------
Common shares outstanding
at end of period 27,984,950 27,984,950 27,984,950 27,984,950
----------- ------------- ----------- -------------
Effect of using weighted average
common and common stock equivalent
shares outstanding (816,830) (2,459,058)
Weighted number of common shares
outstanding 27,168,120 27,984,950 25,525,892 27,984,950
----------- ------------- ----------- -------------
LOSS BEFORE
EXTRAORDINARY CHARGE $(8,667,000) $(270,057,000) $(7,884,000) $(295,562,000)
----------- ------------- ----------- -------------
NET LOSS $(8,667,000) $(270,057,000) $(7,884,000) $(295,562,000)
----------- ------------- ----------- -------------
LOSS PER COMMON AND COMMON
EQUIVALENT SHARE:
LOSS BEFORE
EXTRAORDINARY CHARGE $ (.32) $ (9.65) $ (.31) $ (10.56)
----------- ------------- ----------- -------------
NET LOSS $ (.32) $ (9.65) $ (.31) $ (10.56)
----------- ------------- ----------- -------------
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 26,614
<SECURITIES> 0
<RECEIVABLES> 14,092
<ALLOWANCES> 2,028
<INVENTORY> 0
<CURRENT-ASSETS> 44,457
<PP&E> 481,014
<DEPRECIATION> 316,650
<TOTAL-ASSETS> 296,866
<CURRENT-LIABILITIES> 368,201
<BONDS> 312,870
0
0
<COMMON> 28,039
<OTHER-SE> (212,459)
<TOTAL-LIABILITY-AND-EQUITY> 296,866
<SALES> 0
<TOTAL-REVENUES> 94,653
<CGS> 0
<TOTAL-COSTS> 389,294
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,129
<INTEREST-EXPENSE> 27,391
<INCOME-PRETAX> (294,641)
<INCOME-TAX> 921
<INCOME-CONTINUING> (295,562)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (295,562)
<EPS-PRIMARY> (10.56)
<EPS-DILUTED> (10.56)
</TABLE>
