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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1995
OR
[] 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 0-16498
ADDINGTON RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1125039
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
771 Corporate Drive, Suite 1000
Lexington, Kentucky 40503
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
including area code: (606) 223-3824
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - par value of $1.00 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 21, 1996.
Common stock, par value of $1.00 per share -- $95,493,432
The number of shares of the registrant's common stock outstanding as of
March 21, 1996 - 15,156,401 shares.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
Item 1. Business.
Addington Resources, Inc. and its subsidiaries (the "Company") are engaged
in the development and operation of integrated solid waste disposal systems for
cities and counties in the southeastern United States. Addington Resources,
Inc. was incorporated on September 29, 1986, under the laws of Delaware. The
Company's integrated solid waste disposal operations described below are
conducted through Addington Environmental, Inc. and its affiliates
(collectively, the "Environmental Subsidiaries").
The statements contained in this Annual Report on Form 10-K, including
(without limitation), under Part I, Item 1 (Business), Item 3 (Legal
Proceedings), and Part II, Item 7 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) contain forward looking
statements which involve risks and uncertainties. The Company's actual results
may vary significantly from those stated in any forward looking statements.
Factors that may cause such differences include, but are not limited to,
regulatory changes, loss or failure to obtain governmental permits, competition,
the ongoing consolidation of the solid waste management business and the
availability of acquisition and expansion opportunities on attractive terms.
Landfill Operations
As of March 15, 1996, the Company was operating ten landfills in Kentucky,
North Carolina, Georgia, and Florida through the Environmental Subsidiaries
described below. In developing its landfills, the Company has attempted to
develop a cooperative relationship with the counties in which the Company
operates. The Company has entered into contractual agreements with each county
in which a landfill is located, limiting the amount and source of all accepted
waste. Except as set forth below with respect to the Company's landfill in Bibb
County, Georgia, the Company is currently permitted at each of its landfills to
accept all non-hazardous solid waste which may be disposed of in sanitary
landfills under Subtitle D of the Resource Conservation and Recovery Act. The
Company does not accept hazardous waste at its landfills.
OHIO COUNTY LANDFILL. Ohio County Balefill, Inc. operates a lined landfill
in Ohio County, Kentucky, approximately 35 miles south of Owensboro. The
landfill is owned by Ohio County and is operated by the Company pursuant to a
40-year agreement. The landfill was permitted and constructed by the Company
adjacent to the county landfill, which the Company closed in 1992.
EPPERSON LANDFILL. Epperson Waste Disposal, Inc. owns and operates a lined
landfill in Grant County, Kentucky, located midway between Lexington, Kentucky
and Cincinnati, Ohio. The landfill was permitted and constructed by the Company
adjacent to a facility which was acquired in February 1991 and which the Company
closed in 1992. The lined facility commenced operations in July 1992.
GREEN VALLEY LANDFILL. Green Valley Environmental Corp. owns and operates a
lined landfill located in Greenup County, near Ashland, Kentucky. The landfill,
which commenced operations in November 1992, was developed by the Company on a
virgin parcel of property which it owns.
TRI-K LANDFILL. Tri-K Landfill, Inc. owns and operates a lined landfill in
Lincoln County, Kentucky, which it acquired in June 1992. The landfill is
located approximately 50 miles south of
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Lexington. In March 1995, the Company received a permit to construct a lined
facility adjacent to its initial unlined landfill. The first phase of the new
landfill opened on July 1, 1995.
DOZIT LANDFILL. Dozit Co., Inc. owns and operates a lined landfill in
Union County, Kentucky, approximately 60 miles south of Evansville, Indiana.
The Company commenced operations at the site in October 1994. The facility was
permitted and constructed adjacent to an existing unlined landfill which the
Company purchased in November 1993, and which was closed by the previous owner.
EAST CAROLINA LANDFILL. East Carolina Environmental, Inc. owns and
operates a lined landfill in Bertie County, North Carolina, approximately 60
miles north of Greenville, North Carolina. The landfill was developed by the
Company on a virgin parcel of property which it owns. The landfill commenced
operation in October 1993.
UWHARRIE LANDFILL. In July 1992, Uwharrie Environmental, Inc. commenced
operating a landfill in Montgomery County, North Carolina approximately 60 miles
east of Charlotte. The facility is owned by Montgomery County and operated by
the Company pursuant to a 20-year agreement. In August 1994, the Company
received a permit to construct a new lined facility adjacent to the initial
unlined landfill. Following construction of the facility in 1995, the new
landfill began accepting waste in January 1996.
BROADHURST LANDFILL. Broadhurst Environmental, Inc. operates a lined
landfill in Wayne County, Georgia approximately 40 miles west of Brunswick,
Georgia. The landfill is owned by the Wayne County Solid Waste Management
Authority and was developed by the Company on a virgin parcel of property owned
by the Authority. The Company leases the property from the Authority on a long-
term basis and ownership of the property will revert to the Company at the
termination of the lease. The facility commenced operations in December 1994.
MID-STATE LANDFILL. Mid-State Environmental, Inc. owns and operates a
construction and demolition landfill in Bibb County, Georgia, just outside
Macon. The Company acquired the landfill in May 1994. The existing unlined
landfill operation near Macon is permitted to accept construction and demolition
wastes and certain industrial wastes. The Company has obtained a new permit to
allow the landfill to accept municipal solid waste and began construction of a
new lined facility for disposal of municipal solid waste. The Company expects
to begin accepting waste, including municipal solid waste, in the new landfill
during the second half of 1996.
BRIDGEWAY ACRES SANITARY LANDFILL. In January 1995, Pinellas
Environmental, Inc. commenced operation of a landfill owned by Pinellas County,
Florida. The landfill is located both in the City limits of St. Petersburg and
in Pinellas Park, Pinellas County. The landfill is operated by the Company
pursuant to a 5-year agreement with two 2-year extensions at the option of the
County and contractor.
PERSON COUNTY LANDFILL. In August 1994, Upper Piedmont Environmental, Inc.
entered into a 20-year contract with Person County, North Carolina to permit,
construct, own and operate a new lined landfill. The landfill is currently
being developed on a virgin parcel of property owned by the Company. The
Company expects to begin accepting waste during the second half of 1996.
Anticipated capital expenditures for the Company's existing landfill
facilities for 1996 are projected to be $15.4 million, although the amounts
expended may differ substantially from this amount. In determining whether to
construct additional cells at an existing landfill, the Company considers a
number of factors including the current and projected volume of waste disposed
of at the landfill, the costs of developing the cell, and the market conditions
for the landfill.
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The Company actively pursues additional landfill facilities through
acquisitions, privatization of municipally owned facilities, as well as start-up
facilities, primarily in the southeastern United States. In addition to planned
expenditures for existing facilities, the Company anticipates that the Person
County Landfill and the new Mid-State Landfill will be constructed in 1996 at a
cost of approximately an additional $10.6 million, but there can be no assurance
that these landfills will become operational in 1996 nor that the amounts
actually expended will not differ substantially from this amount. In addition,
should such opportunities arise, there can be no assurance that the Company will
be successful in making an acquisition or of profitably operating the
acquisition. The Company believes that increased consolidation in the solid
waste industry will heighten the competition the Company encounters in its
pursuit of additional landfill facilities.
Waste Collection Services
Established to complement the Company's regional landfills in the
southeastern United States, the Company also owns and operates a collection
company. The collection company operates in Kentucky with approximately 76,000
residential, commercial, and industrial customers, supported by 68 service and
support vehicles. The collection company also operates in Florida and Georgia
with approximately 3,200 residential, commercial and industrial customers,
supported by 13 service and support vehicles.
The Company also owns or operates 9 transfer stations. Waste is collected
and deposited at these stations by the Company and other private haulers for
compaction and transfer to larger trailers for shipment by the Company to its
landfills.
Commercial and industrial collection services are generally performed under
one to three-year service agreements, and fees are determined by such
considerations as market factors, collection frequency, type of equipment
furnished, the type and volume or weight of the waste collected, the distance to
the disposal facility and cost of disposal.
The Company's residential solid waste collection services are performed
under contracts with municipalities giving the Company exclusive rights to
service all or a portion of the homes in their respective jurisdictions. Such
contracts or franchises usually range in duration from one to five years.
Residential services involve the curbside collection of waste by the Company's
vehicles and the transportation of the collected waste to transfer station and
landfills. The fees received by the Company are based primarily on market
factors, frequency and type of service, the distance to the disposal facility
and cost of disposal. Residential collection fees are paid by the residential
customers receiving the service.
Recycling Services
The Company currently operates a materials recycling facility near its
landfill in Montgomery County, North Carolina. The facility accepts mixed solid
waste and mechanically separates the recyclables from the waste stream. The
Company is also engaged in curbside recycling programs in certain Kentucky
communities.
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Employees
At March 15, 1996, the Company employed approximately 381 people. None of
the Company's employees are represented by a labor union, and management
believes that its relations with its employees are good. The Company has been
subject to limited union organizing efforts in the past, but such efforts were
not successful. The Company cannot predict whether there will be any such
activities in the future. Unionization could adversely affect the Company's
costs. The Company maintains administrative offices in Lexington, Kentucky. In
the opinion of management, the Company's offices are adequate and suitable for
its current operations.
Competition
Solid waste management is a very competitive business which requires
substantial investment in labor and capital resources. The Company believes that
the increasing consolidation of the solid waste industry will heighten the
Company's competition. The sources of competition vary by locality and by the
type of services provided, and originate from national, regional and local
companies. Several national waste management companies are much larger and have
far greater capital resources than the Company. The Company also competes with
counties, municipalities and industrial facilities which provide their own waste
collection and disposal operations. Counties and municipalities may have
financial advantages from tax exempt financing available to them, which
advantage may be offset to some extent by budgetary pressures faced by many of
them. Disposal operations compete primarily on the basis of proximity to
collection and hauling operations and on the basis of price. The Company
anticipates that competition in the disposal business will increasingly include
an emphasis on safeguards with respect to the environment, and intends to
continue its policy of constructing and operating landfills with high levels of
environmental protection and monitoring. Incineration and other waste reduction
processes are also sources of competition. However, the Company believes that
its contained landfill operations can complement certain of these processes, in
that landfills serve as receptacles for incinerating trash and nonprocessable
material.
Environmental Liability Insurance and Bonding
The Company has obtained and currently maintains environmental impairment
liability insurance coverage in the amount of $5,000,000 each occurrence,
$10,000,000 aggregate, for certain environmental risks arising from the
operation of landfill facilities. The environmental impairment liability
insurance coverage is specific in qualification and premium cost to each
landfill facility through pre-issuance inspections. If an environmental
impairment exceeds the loss coverage, the Company's financial condition could be
adversely affected. Management believes that the premium charge for its coverage
from commercial insurance underwriters is reasonable.
The Company is also required from time to time to post performance bonds or
bank letters of credit in connection with its hauling and collection contracts
and the operation or closure of its landfills. The ability to obtain these bonds
and letters of credit is contingent upon the Company's performance record and
creditworthiness. If the Company were unable to obtain surety bonds or letters
of credit in sufficient amounts or at reasonable rates, the Company's ability to
operate and expand its waste hauling operations and landfills would be adversely
affected.
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Government Regulation of Environmental Operations
General Regulatory Process. The Company and the waste services industry in
general are subject to extensive, expansive and evolving regulation by federal,
state and local authorities. In particular, the regulatory process requires
firms in the industry to retain and obtain numerous governmental permits to
conduct various aspects of their operations, any of which may be subject to
revocation, modification or denial. The continually shifting policies and
attitudes of the regulatory agencies relating to the industry may impact the
Company's ability to obtain applicable permits from governmental authorities on
a timely basis and to retain such permits. The Company is not in a position to
assess the extent of any such impact, but it could be significant.
State and local governments have also from time to time proposed or adopted
other types of laws, regulations or initiatives with respect to the
environmental services industry. Included among these are laws, regulations and
initiatives to ban or restrict the interstate or inter-county shipment of
wastes, impose higher taxes on out-of-state waste shipments than in-state
shipments, require solid waste to be delivered to a particular facility, and
regulate disposal facilities as public utilities.
The Company makes a continuing effort to anticipate regulatory, political
and legal developments that might affect operations, but cannot predict the
extent to which any legislation or regulation that may be enacted or enforced in
the future may affect its operations.
Permits issued by state regulatory agencies are required before a landfill
may be constructed and operated. Permits need to be renewed periodically and may
be subject to revocation, modification, denial or non-renewal for various
reasons, including failure of the Company to satisfy regulatory concerns. In the
solid waste collection phase, regulation takes such forms as licensing of
collection vehicles, truck safety requirements, vehicular weight limitations
and, in certain localities, limitations on rates, area and time and frequency of
collection. In the solid waste disposal phase, regulation covers various
matters, including gas emission, liquid runoff and rodent, pest, litter and
traffic control. Zoning and land use requirements and limitations are
encountered in the solid waste collection and disposal phases of the Company's
business. In addition, the Company's operations may be subject to water
pollution laws and regulations; air and noise pollution laws and regulations;
and safety standards under the Occupational Safety and Health Act ("OSHA").
Governmental authorities have the power to enforce compliance with these various
laws and regulations and violators are subject to injunctions, fines and
revocation of permits. Private individuals may also have the right to sue to
enforce compliance.
Regulatory or technological developments relating to the environment may
require the Company (as well as others in the solid waste management business)
to modify, supplement or replace equipment and facilities at costs which may be
substantial.
Although the Company intends to conduct its operations in compliance with
applicable laws and regulations, the Company believes that heightened political
and citizen sensitivity causes companies in the solid waste management industry
to be faced, in the normal course of operating their businesses, with the
possibility of expending funds for fines, penalties and environmental
compliance. While the Company believes that it is in material compliance with
federal, state and local regulations and permits, there can be no assurance that
violations will not occur in the future or that claims of deficient performance
in the past, present or future will not be asserted. Any such violations or
claims could have a material adverse effect on the Company's operations or
financial condition or reputation.
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Permitting and Construction Process. The Company is required to obtain
construction and operating permits when it designs and constructs new landfills.
When appropriate, the Company pursues permits for expansion and/or modification
of its landfills, including landfill sites that it acquired. Permit expansions
and modifications generally take the form of vertical expansions of existing
disposal capacity, lateral expansions of permitted disposal acreage, or
modifications of operating restrictions to allow increased disposal volume or
additional waste streams.
Although the permitting process varies from state to state, the following
summary sets forth the typical steps in the permitting process.
In most instances, some form of local zoning or planning approval, commonly
referred to as siting approval, is required to permit a site and may be required
to expand or modify a landfill. Particularly in urban areas, this process often
requires complying with city or county zoning regulations through a separate
application process to a zoning or planning board. An applicant generally files
various reports and drawings which describe the project and public hearings are
held. Frequently, community opposition will be present and many local zoning or
planning authorities may consider community opposition in deciding whether to
grant siting approval. Following hearings, a decision is made. Generally, both
the applicant and any opposition have the right to appeal such decision.
Although not always required, the local approval process is usually completed
before applying for a state permit.
Upon receipt of local approval, an applicant must then submit detailed
construction and operating plans for state approval. Most states require an
applicant to evidence that a new, modified or expanded facility will meet or
exceed state regulations regarding disposal facility siting and design
specifications. States generally consider the technical merits of an
application, particularly such matters as geology, hydrogeology, ecology,
archaeology, soil characteristics, surface drainage, the presence of, or
location relative to, airports, wetlands and local water supply systems and the
adequacy of local road systems.
Engineering consultants design the project to meet state regulations and
standards. This design is reviewed by state officials, comments are issued and,
possibly after negotiations between the applicant and the state officials,
revisions are made by the applicant. Once the design is approved, public notice
is given and frequently a hearing held. Both the applicant and any opposition
generally have the right to appeal the decision.
Resource Conservation and Recovery Act ("RCRA"). RCRA regulates the
generation, treatment, storage, handling, transportation and disposal of
hazardous and solid waste and requires states to develop programs to insure the
safe disposal of solid waste in sanitary landfills. RCRA divides solid waste
into two groups, hazardous and nonhazardous. Wastes are generally classified as
hazardous wastes if they: (i) either (a) are specifically included on a list of
hazardous wastes or (b) exhibit certain characteristics; and (ii) are not
specifically designated as nonhazardous. Wastes classified as hazardous under
RCRA are subject to much stricter regulation than wastes classified as
nonhazardous. Among the wastes that are specifically designated as nonhazardous
waste are household waste and various types of special waste. These wastes,
which will be accepted at the Company's landfills, may contain incidental
hazardous substances.
On October 9, 1991, the EPA promulgated new regulations pursuant to
Subtitle D of RCRA. These new regulations include location standards, facility
design standards, operating criteria, closure and post-closure requirements,
financial assurance standards and groundwater monitoring requirements as well as
corrective action standards, all of which had not previously been uniformly
applied at landfills within the fifty states. In addition, the new regulations
require
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landfills constructed or expanded after October 9, 1993, to have one or more
liners (typically high-density polyethylene liners) to keep leachate out of
groundwater and have extensive systems to collect leachate for handling and
treatment. In addition, by October 9, 1996, groundwater wells must also be
installed at virtually all landfills to monitor groundwater quality and the
leachate collection system operation. The regulations also require (where
threshold test levels are met) that methane gas generated at landfills be
controlled in a manner that will protect human health and the environment.
Because some states have already adopted regulations at least as stringent as
the new federal regulations, the new Subtitle D regulations will cause greater
changes in the landfill regulation of certain states than of others. The Company
believes that each of its operating landfills complies in all material respects
with the applicable requirements of RCRA, including those regulations effective
October 9,1996.
The Federal Water Pollution Control Act ("Clean Water Act"). The Clean
Water Act established rules regulating the discharge of pollutants from a
variety of sources, including solid waste disposal sites, into waters of the
United States. For any discharge, the Clean Water Act would require the Company
to apply for and obtain a discharge permit, conduct sampling and monitoring and,
under certain circumstances, reduce the quantity of pollutants in those
discharges. Also, virtually all landfills are required to comply with the
federal storm water regulations, which are designed to prevent possibly
contaminated storm water from flowing into surface waters.
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"). CERCLA addresses problems created by the release of any hazardous
substance into the environment. CERCLA's primary mechanism for remedying such
problems is to impose strict joint and several liability for cleanup of
facilities among all past owners and operators of the site at the time of
disposal and current owners and operators of the site as well as the generators
and the transporters who arranged for disposal and transportation of hazardous
substances. The costs of CERCLA cleanup can be very substantial. Liability under
CERCLA does not depend upon the existence or disposal of "hazardous waste" but
can also be founded upon the existence of even very small amounts of the more
than 1,000 "hazardous substances" listed by the EPA.
The Clean Air Act ("Clean Air Act"). The Clean Air Act provides for
federal, state and local regulation of the emission of air pollutants and is
applicable to landfills. The EPA has proposed new source performance standards
regulating overall air emissions from solid waste landfills. The EPA may also
issue regulations controlling the emissions of particular air pollutants from
solid waste landfills. Moreover, landfills located in areas with air pollution
problems may be subject to even more extensive air pollution controls.
State and Local Regulations. All states have laws and regulations
governing the generation, handling, transfer, transportation and disposal of
solid waste, water and air pollution and the design, operation, maintenance,
closure and post-closure maintenance of landfills.
Most states have already tightened, or are in the process of tightening,
the regulatory requirements on the permitting of new and expanded solid waste
facilities and on the continued operation of existing facilities. As Subtitle D
takes effect, state regulations are expected to become both more stringent and
more uniform nationwide. The increased stringency of state regulations may be
expected to benefit the Company, as older landfills are forced to close.
However, the increasing state and local scrutiny of landfills also makes it more
difficult for the Company to comply with the continually evolving and expensive
regulations applicable to the disposal of solid waste.
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Discontinued Operations
Discontinued operations during 1995 consisted of the following: coal
mining, mining equipment manufacturing and licensing, citrus properties in
Belize, precious and industrial metals mining and incidental limestone
properties.
On August 4, 1995, the Company appointed four new members to its Board of
Directors, Howard P. Berkowitz (Chairman), Richard Ravitch, James Grosfeld and
Harold Blumenstein, and accepted the resignation of Robert Addington from the
Board of Directors. These changes in the Board of Directors followed the
execution of a definitive agreement on August 4, 1995, between Larry, Robert and
Bruce Addington for their sale of an aggregate of 2,000,000 shares of the
Company's Common Stock to HPB Associates, L.P., of which Howard Berkowitz is
managing general partner and Messrs. Ravitch and Blumenstein are limited
partners.
Following the reconstitution of the Board of Directors, the Company
determined to dispose of its remaining non-environmental operations, with the
net proceeds from such sale being deployed to expand the Company's environmental
operations.
After soliciting indications of interest in its non-environmental
operations and responding to inquiries received after its August 4, 1995
announcement, on September 22, 1995, the Company entered into a stock purchase
agreement with Addington Acquisition Company, Inc., Larry Addington, Robert
Addington and Bruce Addington (collectively, the "Addington Brothers") whereby
the Company agreed to sell, for $30,000,000 subject to certain working capital
adjustments, all the issued and outstanding shares of common stock of Addington
Mining, Inc., Mining Technologies, Inc., Addwest Mining, Inc. and Addington Coal
Holding, Inc. In addition, the Company retained the right to receive certain
payments (anticipated to aggregate $3,000,000 after December 31, 1995) due under
the Company's technology sale to BHP Australia Coal Pty. Ltd. The sale of these
coal mining and mining equipment manufacturing and licensing subsidiaries was
consummated on November 2, 1995.
Included in this transaction and pursuant to an option agreement date
August 4, 1995, the Company sold to the Addington Brothers all of the issued and
outstanding shares of common stock of the Company's subsidiary, Tennessee
Mining, Inc. The Company is entitled to receive a royalty based on tons of coal
delivered under a certain coal sales contract, up to a maximum aggregate royalty
of $12,500,000.
On September 22, 1995, the Company entered into an agreement to dispose of
its citrus operations through the sale of its subsidiary, Belize River Fruit
Co., to Larry and Bruce Addington in exchange for 1,000,000 shares of Common
Stock of the Company owned by Larry and Bruce Addington. This transaction was
consummated on November 2, 1995.
The Company had previously explored opportunities to expand into the mining
of limestone in western Kentucky. On November 17, 1995, the Company sold its
limestone operations to an unrelated party for $2,500,000.
Through its subsidiary Addwest Minerals, Inc., the Company engaged in the
development of gold and precious metals mining operations. On December 29, 1995,
the Company sold the subsidiary to a private Canadian business group for
approximately $3,525,000 in cash and assumption of indebtedness.
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Item 2. Properties.
The Company leases its executive offices consisting of approximately 12,000
square feet located at 771 Corporate Drive, Lexington, Kentucky.
The table below sets forth certain information (based on current permit
status) as of December 31, 1995 with respect to nine of the Company's operating
landfills. The Company constructs its landfills in a series of landfill cells as
additional airspace is needed to accommodate customer demand.
The Company owns in fee the property at the following landfills: Epperson,
Green Valley, Tri-K, Dozit, East Carolina and Mid-State. The Company operates
landfills under contracts with the local governments at Ohio County, Uwharrie
and Broadhurst. For additional information concerning the Company's landfills,
see Item 1. "Business--Landfill Operations."
<TABLE>
<CAPTION>
REMAINING WASTE
CAPACITY/1/ REMAINING FOOTPRINT/3/
LANDFILL (CUBIC YARDS) LIFE/2/ TOTAL ACRES (ACRES)
- -------- ------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Ohio County Landfill 19,395,756 47 years 908 178
Epperson Landfill 11,223,301 29 years 600 100
Green Valley Landfill 2,704,748 9 years 266 37
Tri-K Landfill 6,575,341 42 years 318 64
Dozit Landfill 6,124,268 49 years 224 47
East Carolina Landfill 9,059,552 17 years 504 103
Uwharrie Landfill 5,023,140 19 years 300 58
Broadhurst Landfill 9,405,565 48 years 901 80
Mid-State Landfill/4/ 6,388,613 23 years 400 78
</TABLE>
_____________________
1 Total yards of airspace does not represent total yards of actual waste space
because daily soil cover reduces the airspace available for waste. However,
available airspace may be maximized through compacting the waste and using
alternative cover systems.
2 Determined by dividing average daily volume into remaining capacity. Life
expectancy will decrease with increases in the rate of waste disposal.
3 Maximum acreage permitted for actual waste disposal area.
4 Includes information from area expected to open during the second half of
1996.
In January 1995, the Company commenced operation of a landfill owned by
Pinellas County, Florida. The landfill is operated by the Company pursuant to a
5-year agreement with two 2-year extensions at the option of the county and
contractor. The Company believes that the landfill has remaining capacity in
excess of the amount needed during the term of the 5-year agreement.
The Company is currently in the process of obtaining a permit to construct
a landfill in Person County, North Carolina, which is expected to have a
capacity of 8,500,000 cubic yards, total acreage of 583 acres, and a waste
footprint of 70 acres. The Company currently has the right to purchase 583
acres.
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Item 3. Legal Proceedings.
There are no material pending legal proceedings against the Company. The
Company's business is regulated by federal, state and local statutes and
regulations regulating the discharge of materials into the environment or
primarily for the purpose of protecting the environment. In the ordinary course
of its operations, the Company is frequently a party to judicial or
administrative proceedings involving all levels of governmental authorities and
other interested parties. These proceedings relate to original or renewal
permit applications in connection with the establishment, operation, expansion,
closure and post-closure activities relating to its landfills. In these
proceedings legal challenges are routinely made by various parties.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of stockholders (the "Annual Meeting") was
held on October 17, 1995.
(b) Not applicable.
(c) Briefly described below is each matter voted upon the number of
votes cast for, against or at the Annual Meeting, withheld, as
well as the number of abstentions. There were no broker non-
votes on any matters.
(1) Vote count on election of Directors at the Annual Meeting:
<TABLE>
<CAPTION>
Name Number of Shares Withheld Votes
---- ---------------- --------------
<S> <C> <C>
Larry Addington 13,605,025 14,060
Stephen Addington 13,605,025 14,060
Howard P. Berkowitz 13,605,005 14,080
Harold Blumenstein 13,605,005 14,080
Jack C. Fisher 13,605,125 13,960
James Grosfeld 13,605,205 13,880
Richard Ravitch 13,605,005 14,080
</TABLE>
(2) Arthur Andersen LLP was appointed as the Company's
independent public accountants for the fiscal year ending December 31,
1995 at the Annual Meeting. The results of the vote were: 13,614,815
shares were voted For; 1,740 shares were voted Against; and 2,530
shares Abstained.
-12-
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters.
----------------------------------------
The Company's Common Stock trades on the Nasdaq National Market System
(symbol-ADDR). The table below sets forth the high and low sales prices as
reported on Nasdaq for the periods indicated.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
1994
First Quarter $19 3/4 $14
Second Quarter 17 3/4 13 1/2
Third Quarter 16 3/4 12 3/4
Fourth Quarter 13 1/2 8
1995
First Quarter $11 1/2 $ 8
Second Quarter 14 7/8 9 1/2
Third Quarter 15 1/2 9 1/2
Fourth Quarter 15 1/2 12 3/8
</TABLE>
At March 22, 1996, the Company's Common Stock was held by approximately
1,500 stockholders of record or through nominee or street name accounts with
brokers.
Holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. The Company has not paid any dividends during the past two years and
anticipates that, for the foreseeable future, it will follow a policy of
retaining earnings to finance expansion and development of its business.
The Company currently has certain financing arrangements which contain
certain restrictive covenants which, among others, limit the amount of dividends
that the Company can pay, limit its ability to incur additional indebtedness,
require an as-defined minimum tangible net worth, require a minimum current
ratio, and limit the ability of certain subsidiaries to pay cash dividends to
the Company. See Note 10 to the Consolidated Financial Statements.
-13-
<PAGE>
Item 6. Selected Financial Information
The following selected financial information of the Company for each of the five
years in the period ended December 31, 1995 are derived from the Consolidated
Financial Statements of the Company. The Company has restated its previously
issued financial statements as required in connection with the implementation of
discontinued operations accounting. The selected financial information should
be read in conjunction with the Consolidated Financial Statements and the notes
thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
Income Statement Data 1995 1994 1993 1992 1991
- --------------------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total Revenues $ 56,739 $ 36,057 $ 22,600 $ 7,779 $ 1,867
-------- -------- -------- -------- --------
Costs and Expenses
Cost of operations 30,574 19,665 10,966 4,037 1,504
Provision for asset writedown -- 670 5,122 -- --
Depreciation and amortization 7,506 4,133 2,728 832 329
Selling, general and administrative 6,631 7,119 6,503 2,479 985
-------- -------- -------- -------- --------
Total costs and expenses 44,711 31,587 25,319 7,348 2,818
-------- -------- -------- -------- --------
Income (loss) from operations 12,028 4,470 (2,719) 431 (951)
-------- -------- -------- -------- --------
Total interest and other income (expense) (528) (480) 10 (1,037) (443)
-------- -------- -------- -------- --------
Income (loss) before income tax
provision (benefit) 11,500 3,990 (2,709) (606) (1,394)
Income tax provision (benefit) 4,426 1,596 (1,029) (230) (529)
-------- -------- -------- -------- --------
Net income (loss) from continuing
operations 7,074 2,394 (1,680) (376) (865)
Discontinued operations, net of tax (24,830) (9,528) (14,509) 11,412 (8,821)
-------- -------- -------- -------- --------
Net income (loss) $(17,756) $ (7,134) $(16,189) $ 11,036 $ (9,686)
======== ======== ======== ======== ========
Income (loss) from continuing operations
per share $ 0.45 $ 0.15 $ (0.11) $ (0.02) $ (0.06)
Income (loss) from discontinued
operations per share (1.58) (0.60) (0.93) 0.74 (0.58)
-------- -------- -------- -------- --------
Income (loss) per share $ (1.13) $ (0.45) $ (1.04) $ 0.72 $ (0.64)
======== ======== ======== ======== ========
Cash dividends declared per share -- -- -- -- --
Balance Sheet Data
- ------------------
Working capital $ 5,653 $ 1,259 $ 15,083 $ 33,781 $ 10,640
Total assets 128,282 194,321 281,089 282,277 274,134
Long-term debt, net of current portion 14,407 32,767 10,798 1,048 322
Stockholders' equity 91,186 120,221 124,933 136,811 125,685
</TABLE>
-14-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
(amounts in thousands, except per share data)
The following discussion reviews the Company's operations for the three years
ended December 31, 1995 and should be read in conjunction with the Company's
Consolidated Financial Statements and related notes thereto and Selected
Consolidated Financial Information. The Company has restated its previously
issued financial statements in connection with the Company's determination to
discontinue its operations relating primarily to coal mining, mining equipment
manufacturing and licensing, citrus properties in Belize, precious and
industrial metals mining and incidental limestone properties. The Company's
continuing operations are comprised of integrated solid waste management
including landfill operations and waste collection and recycling services.
As part of the Company's plan to dispose of all of its non-environmental
operations, it has taken the following actions:
(1) On September 22, 1995, the Company entered into a stock purchase agreement
with Addington Acquisition Company, Inc., Larry Addington, Robert Addington
and Bruce Addington (collectively, the "Addington Brothers") whereby the
Company agreed to sell, for $30,000, subject to certain working capital
adjustments, in exchange for all the issued and outstanding shares of
common stock of its subsidiaries, Addington Mining, Inc., Mining
Technologies, Inc., Addwest Mining, Inc. and Addington Coal Holding, Inc.
In addition, the Company retained the right to receive certain payments
(anticipated to aggregate $3,000 after December 31, 1995) due under the
Company's technology sale to BHP Australia Coal Pty. Ltd. (see Note 4).
The sale was consummated on November 2, 1995.
(2) Included in this transaction and pursuant to an option agreement dated
August 4, 1995, the Company sold to the Addington Brothers all of the
issued and outstanding shares of common stock of its subsidiary, Tennessee
Mining, Inc. The Company is entitled to receive a royalty based on tons of
coal delivered under a certain coal sales contract, up to a maximum
aggregate royalty of $12,500.
(3) On September 22, 1995, the Company entered into an agreement to sell all of
the issued and outstanding shares of common stock of its subsidiary, Belize
River Fruit Co., to Larry and Bruce Addington in exchange for 1,000 shares
of common stock of the Company owned by Larry and Bruce Addington. The
transaction was consummated on November 2, 1995.
(4) On November 17, 1995, the Company sold all of the real property, as well as
all buildings, structures and improvements of its wholly owned subsidiary,
New River Lime, Inc. (NRL), to an unrelated party for $2,500 in cash.
(5) On November 1, 1995, the Company entered into a letter agreement that
provided for the sale to an unrelated party of all the capital stock of
Addwest Minerals, Inc. (Addwest). On December 29, 1995, the Company
consummated the sale of the capital stock of Addwest. The total amount of
proceeds received by the Company with the sale of Addwest was $3,525.
-15-
<PAGE>
Results of Operations 1995 Compared with 1994
---------------------------------------------
Net income from continuing operations during the year ended December 31, 1995
was $7,074 or $.45 per share, compared to net income of $2,394 or $.15 per share
for the year ended December 31, 1994.
The Company's revenues and income from continuing operations for the years ended
December 31, 1995 and 1994, respectively, are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1995
- ---------------------------------------------------------------------------------------------------------------------
Landfill/Transfer Hauling/Transfer Other Elim (1) Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $48,788 $17,338 $ 294 $(9,681) $56,739
Income from Operations 14,514 (1,423) (1,063) ---- 12,028
Tons Received by
Landfills (2) 1,781
- ---------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
- ---------------------------------------------------------------------------------------------------------------------
Landfill/Transfer Hauling/Transfer Other Elim (1) Total
- ---------------------------------------------------------------------------------------------------------------------
Revenues $30,978 $10,604 ---- $(5,525) $36,057
Income from Operations 8,503 (3,059) (974) ---- 4,470
Tons Received by
Landfills (2) 1,143
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These amounts eliminate intercompany revenues
(2) Excludes tons at one landfill managed by the Company for Pinellas County
Florida
Total revenues increased from $36,057 generated during the year ended December
31, 1994 to $56,739 generated during the year ended December 31, 1995. This 57%
increase in total revenues reflects the 56% increase in tons of waste received
at the Company's landfills as well as substantially improved operating results
from the Company's waste collection services. This increase in tons is
primarily attributable to internal growth, including additional tonnage received
at the Company's East Carolina and Epperson sites under new contracts entered
into in May and June 1994, respectively, and the operation of ten landfills
during the entire year of 1995. During 1994, the Company operated six landfills
during the entire year and three landfills during a portion of the year. The
six landfills that operated during the entire year of 1994 generated $26,533
revenues and received 1,077 tons. During 1995 these same six landfills
generated $34,701 revenues and received 1,522 tons. Currently, the Company has
two landfills under development, but the Company can make no assurance as to
when (or if) these landfills will be operational. Improved revenues arising
from the Company's waste collection services are primarily the result of
additional customers and additional revenues generated by a contract signed in
June 1995 to operate a transfer station in central Kentucky. The Company does
not allow a discount on its waste collection services for waste delivered to
Company landfills.
As a percentage of total revenues, cost of operations decreased to 54% for the
year ended December 31, 1995 as compared to 55% for the year ended December 31,
1994. This decrease reflects improved operating efficiencies at the waste
collection operations as well as economies of scale realized by the Company as
certain of its fixed costs are spread over a broader revenue base.
During the year ended December 31, 1994, the Company provided for asset write-
downs of $670 associated with certain environmental projects which the Company
decided should no longer be
-16-
<PAGE>
pursued. No provisions occurred through the year ended December 31, 1995 in the
environmental business.
Depreciation and amortization increased $3,373 (or 82%) during the year ended
December 31, 1995 as compared to the year ended December 31, 1994. This
increase is primarily attributable to an increase in tonnage received as well as
the purchase and development of additional capital assets within the
environmental operations. Capitalized landfill development costs are amortized
as permitted airspace of the landfill or the related cell, as applicable, is
consumed.
Selling, general and administrative expenses decreased $488 (or 7%) during the
year ended December 31, 1995 as compared to the year ended December 31, 1994.
As a percentage of revenues, selling, general and administrative expenses
decreased from 20% to 12%. This decline is primarily due to additional
administrative expenses incurred during 1994 related to the severance package
given to the former environmental president and lower general and administrative
expenses incurred during 1995 due to lower corporate overhead incurred,
primarily executive salaries, resulting from the sale of the non-environmental
operations and overall improved operating efficiencies at the Company's
environmental operations.
Income from operations increased $7,558 (or 169%) during the year ended December
31, 1995. Income from operations increased as a percentage of revenues from 12%
to 21%. The increase in income from operations in dollars and as a percentage
of revenues is attributable to : (1) the higher revenues generated by the
Company's landfills and hauling operations allowing the Company to spread its
fixed costs over a larger revenue base, (2) improved operational efficiencies
at the Company's hauling operations, and (3) the absence of any provision for
asset write-downs in 1995 in contrast to the $670 recorded in 1994.
Interest income decreased to $444 during the year ended December 31, 1995 as
compared to $772 during the year ended December 31, 1994. The Company has from
time to time paid amounts into escrow under state regulation related to closure
and post-closure cost of its landfills. This decrease is due to a decrease in
escrow cash balances outstanding during 1995 as compared to 1994. During 1995,
the Company issued letters of credit in exchange for reducing or eliminating
virtually all of its escrow accounts (see Note 1d).
Interest expense increased to $955 during the year ended December 31, 1995 as
compared to $277 during the year ended December 31, 1994. This increase is
principally due to higher debt levels during 1995 compared to 1994. Average
debt levels were higher in 1995 due to additional borrowing on the Company's
line of credit to fund certain landfill acquisition, construction and
development costs. The amount of interest capitalized during 1995 was $2,012
compared to $1,464 capitalized during 1994.
Other expense was $17 during the year ended December 31, 1995 compared to $975
during the year ended December 31, 1994. During 1994, the Company wrote-off its
$1,200 investment in a recycling technologies company (see Note 15b).
The Company's effective tax rate during 1995 was 38.5% compared to 40% during
1994. The decline in the Company's effective tax rate was primarily due to
utilization of minimum tax credit carryforwards in 1995.
During the third quarter of 1995, the Company implemented a formal plan to
dispose of all of its non-environmental operations. The Company initially
recorded an estimate of the loss on the disposal of the discontinued operations
of approximately $30,500 (net of income tax benefits of approximately $10,000)
which represents the estimated loss on the disposal of the non-
-17-
<PAGE>
environmental operations and a provision of approximately $2,000 for expected
operating losses through the final disposition of such operations.
Upon ultimate disposal of its discontinued operations, the Company determined
its initial estimates did not require adjustment.
As of December 31, 1995, the Company has sold all of its subsidiaries included
in discontinued operations, hence fully disposing of all non-environmental
operations (see Note 3). The recorded transactions reflect the disposal of all
of the Company's non-environmental segments and, accordingly, the operating
results of these segments have been classified as discontinued operations for
all periods presented in the accompanying consolidated financial statements.
Operating results from the discontinued operations for the years ended December
31, were as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Operating revenues $105,056 $115,099
-------- --------
Income (loss) before income taxes 7,606 (14,908)
Income tax provision (benefit) 1,899 (5,380)
-------- --------
Income (loss) from discontinued
operations $ 5,707 $ (9,528)
-------- --------
</TABLE>
Included in income from discontinued operations for 1995 is approximately
$14,000 of revenue and $13,000 of pre-tax income from the sale of the Company's
mining technology patent rights in Australia, offset by a $5,300 disposal loss
accrual recorded for the Company's precious and industrial metals mining
subsidiary.
Included in the loss from discontinued operations in 1994 are the following
pretax items: $6,157 loss on disposal in connection with Pittston Minerals
Group, Inc. (Pittston) (see Note 3e), $6,800 loss on Southern Illinois Mining
Company, Inc. (see Note 3f) and $3,400 loss on limestone project.
The assets and liabilities of the discontinued operations have been reclassified
in the accompanying consolidated balance sheets from the historical
classification in order to separately identify them as net assets of
discontinued operations. These net assets consist primarily of net working
capital, tangible and intangible noncurrent assets and other long-term
liabilities.
-18-
<PAGE>
Results of Operations 1994 Compared with 1993
---------------------------------------------
Net income from continuing operations during 1994 was $2,394 or $.15 per share,
compared to net loss of $1,680 or $.11 per share for 1993.
The Company's revenues and income from continuing operations for the years ended
December 31, 1994 and 1993, respectively, are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1994
- -------------------------------------------------------------------------------------------------------------------
Landfill/Transfer Hauling/Transfer Other Elim Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $30,978 $10,604 ---- $(5,525) $36,057
Income (loss) from Operations 8,503 (3,059) (974) 4,470
Tons Received by
Landfills (2) 1,143
- -------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
- -------------------------------------------------------------------------------------------------------------------
Landfill/Transfer Hauling/Transfer Other Elim Total
- -------------------------------------------------------------------------------------------------------------------
Revenues $17,264 $ 7,665 ---- $(2,329) $22,600
Income (loss) from Operations 5,817 (2,268) (6,268) ---- (2,719)
Tons Received by
Landfills (2) 753
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These amounts eliminate intercompany revenues.
(2) Excludes tons at one landfill managed by the Company for Pinellas County
Florida
Total revenues increased from $22,600 generated during the year ended December
31, 1993 to $36,057 generated during the year ended December 31, 1994. This 60%
increase in total revenues reflects the 52% increase in tons of waste received
at the Company's landfills. This increase in tons is primarily attributable to
internal growth and the operation of six landfills during the entire year of
1994, and three landfills during a portion of the year. During 1993, the
Company operated five landfills during the entire year and one landfill during a
portion of the year. The five landfills that operated during the entire year of
1993 generated $15,696 revenues and received 715 tons. During 1994 these same
five landfills generated $18,431 revenues and received 833 tons. The Company
does not allow a discount on its waste collection services for wasted delivered
to Company landfills.
As a percentage of total revenues, cost of operations increased from 49% for
1993 to 55% for 1994. This increase is primarily attributable to the three
additional landfills coming on-line in 1994 having higher cost of operations
compared to the six landfills already operating. These higher losses are
principally due to these new landfills having relatively higher fixed costs
during their start-up phase due to lower tonnage volumes compared to the
existing six landfills. Additionally the Company's losses from hauling
operations increased in 1994. The increase in these losses from hauling
operations was primarily due to the Company investing in a total of three start-
up hauling operations in late 1993 and 1994. During the start-up phase, the
Company incurred losses while building the revenue base of these start-up
hauling operations.
During the year ended December 31, 1994, the Company provided for asset write-
downs of $670 associated with certain environmental projects which the Company
decided should no longer be pursued. During the year ended December 31, 1993,
the Company wrote-off $5,122 related to certain experimental recycling and
composting technology assets (see Note 15).
Depreciation and amortization increased $1,405 (or 52%) during the year ended
December 31, 1994 as compared to the year ended December 31, 1993. This
increase is primarily attributable
-19-
<PAGE>
to an increase in tonnage received as well as the purchase and development of
additional capital assets within the environmental operations. Capitalized
landfill development cost are amortized as permitted airspace of the landfill or
the related cell, as applicable, is consumed.
Selling, general and administrative expenses increased $616 (or 9%) during the
year ended December 31, 1994 as compared to the year ended December 31, 1993.
As a percentage of revenues, selling, general and administrative expenses
decreased from 26% to 20%, reflecting additional overhead needed to support the
growth of the environmental operations and additional administrative expenses
incurred during 1994 related to the severance package given to the former
environmental president.
Income from operations increased $7,189 during the year ended December 31, 1994.
The increase in income from operations is attributable to : (1) the higher
revenues generated by the Company's landfill operations allowing the Company to
spread its fixed costs over a larger revenue base, and (2) the provision for
asset write-downs in 1994 amounting to $670 compared to $5,122 in 1993.
Interest income increased from $0 during the year ended December 31, 1993 to
$772 during the year ended December 31, 1994. This increase is due to an
increase in the average amount of short-term investments and restricted cash
outstanding during 1994.
Interest expense increased form $0 during the year ended December 31, 1993 to
$277 during the year ended December 31, 1994. This increase is primarily due to
the Company's ability to capitalize additional interest expense in 1993 compared
to 1994. The amount of interest capitalized during 1994 was $1,464 compared to
$2,111 capitalized during 1993.
Other expense was $10 during the year ended December 31, 1993 compared to $975
during the year ended December 31, 1994. During 1994, the Company wrote-off its
$1,200 investment in a recycling technologies company (see Note 15).
The Company's effective tax rate during 1993 was 38% and remained relatively
unchanged compared to 40% during 1994.
During the third quarter of 1995, the Company implemented a formal plan to
dispose of all of its non-environmental operations. As of December 31, 1995,
the Company has sold all of its subsidiaries included in discontinued
operations, hence fully disposing of all non-environmental operations (see Note
3). The recorded transactions reflect the disposal of all of the Company's non-
environmental segments and, accordingly, the operating results of these segments
have been classified as discontinued operations for all periods presented in the
accompanying consolidated financial statements. Operating results from the
discontinued operations for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Operating revenues $115,099 $359,218
-------- --------
Income (loss) before income taxes (14,908) (18,897)
Income tax provision (benefit) (5,380) (4,388)
-------- --------
Income (loss) from discontinued
operations $ (9,528) $(14,509)
-------- --------
</TABLE>
-20-
<PAGE>
Included in the loss from discontinued operations in 1994 are the following
pretax items: $6,157 loss on disposal in connection with Pittston Minerals
Group, Inc. (Pittston) (see Note 3e), $6,800 loss on Southern Illinois Mining
Company, Inc. (see Note 3f) and $3,400 loss on limestone project.
Included in the loss from discontinued operations in 1993 are the following
pretax items: $9,384 loss on sulfur project, $5,800 loss on Southern Illinois
Mining Company, Inc. (see Note 3f) and $4,050 loss on litigation settlements.
The assets and liabilities of the discontinued operations have been reclassified
in the accompanying consolidated balance sheets from the historical
classification in order to separately identify them as net assets of
discontinued operations. These net assets consist primarily of net working
capital, tangible and intangible noncurrent assets and other long-term
liabilities.
-21-
<PAGE>
Financial Condition
-------------------
The Company's cash and cash equivalents and short-term investments totaled
$3,387 at December 31, 1995 compared to $4,193 at December 31, 1994. This
decrease is primarily due to the Company using its cash and investments to pay
down debt during 1995.
Accounts receivable at December 31, 1995 totaled $9,090, compared to the balance
of $7,011 at December 31, 1994. This increase is primarily due to additional
tonnage being received by the Company's landfill operations as well as expansion
of the Company's waste collection services.
Prepaid expenses and other at December 31, 1995 total $2,626 compared to the
balance of $193 at December 31, 1994. This increase is primarily due to the
timing of payments on prepaid insurance and other prepaid expenses.
Property, plant and equipment, net, increased to $105,747 at December 31, 1995,
compared to $81,517 at December 31, 1994. This increase is primarily due to an
increase in landfill and other environmental related development costs, net of
depreciation charges.
Property, plant and equipment and other long-term assets of discontinued
operations totaled $91,490 at December 31, 1994. These assets were subsequently
sold in 1995 as discussed in detail in Note 3.
Restricted cash decreased to $40 at December 31, 1995 as compared to $4,348 at
December 31, 1994. This decrease is primarily due to a change in the Company's
strategy to satisfy individual state requirements for securing landfill closure
liabilities. In the past, the Company deposited cash in trust funds to meet
individual state regulations for closure and post closure liabilities.
Currently, the Company meets these regulations by posting letters of credit.
Other assets decreased to $1,850 at December 31, 1995 as compared to $5,569 at
December 31, 1994. This decrease is primarily attributable to the sale of an
aircraft by the Company during the first quarter of 1995. This aircraft was
classified as an asset held for sale in other assets during 1994.
Accounts payable at December 31, 1995 increased to $4,743 as compared to the
December 31, 1994 balance of $3,183. This 49% increase is primarily due to the
growth of the Company's environmental operations and the timing of payments on
accounts payable.
The Company's current portion of long-term debt outstanding increased to $1,823
at December 31, 1995 as compared to $880 at December 31, 1994, primarily due to
additional landfill equipment being acquired in 1995 and a change in the method
used by the Company to finance equipment during 1995. Previously, this
equipment was financed under operating leases and during 1995 these leases were
converted to capital leases.
Accrued expenses and other liabilities decreased to $3,504 at December 31, 1995
as compared to the $5,386 balance at December 31, 1994. This decrease is
primarily due to the timing of payments relating to payroll, property taxes,
workers compensation and other expenses.
The Company's net current liabilities of discontinued operations were $689 at
December 31, 1994. These assets were subsequently sold in 1995 as discussed in
detail in Note 3.
The Company's long-term debt outstanding decreased to $14,407 at December 31,
1995 as compared to $32,767 at December 31, 1994. This decrease is primarily
due to the Company paying down the environmental line of credit with proceeds
from the sale of its non-environmental
-22-
<PAGE>
operations, offset by the additional debt incurred in connection with converting
operating leases of equipment to capital leases.
Accrued closure and post-closure costs at December 31, 1995 increased to $5,168
as compared to the $2,784 balance at December 31, 1994. This increase is
primarily due to the operation of ten landfills during the entire year of 1995.
During 1994, the Company operated six landfills during the entire year and three
landfills during a portion of the year. The accrual for closure and post-
closure cost is based upon the estimated aggregate closure and post-closure
costs to be incurred at the time that the landfills cease to accept waste and
are closed. The amount of the accrual is calculated using the number of tons
received by the landfills each year. Therefore, the increase in this accrual is
due to the landfills receiving additional tons during 1995.
The Company's other long-term liabilities increased to $7,451 at December 31,
1995 as compared to $2,981 at December 31, 1994. This accrual primarily relates
to income taxes and the remaining reserve recorded to cover costs associated
with the disposal of the discontinued operations.
The Company's long term liabilities of discontinued operations were $24,864 at
December 31, 1994. These assets were subsequently sold in 1995 as discussed in
detail in Note 3.
-23-
<PAGE>
Liquidity and Capital Resources
-------------------------------
The working capital needs of the Company have been met primarily though a
combination of funds provided by banks, proceeds from the sale of non-
environmental operations (see Note 3), and cash generated through operations.
The overall net increase in cash and cash equivalents was $668 and $1,920 for
the years ended December 31, 1995 and 1994, respectively. Such net increases
reflect net cash used in operating, investing and financing activities.
Net cash provided by operations was $15,908 and $11,900 for 1995 and 1994,
respectively. This fluctuation between years is primarily a result of improved
1995 operating income.
Net cash provided by (used in) investing activities was $9,403 and $(32,224) for
1995 and 1994, respectively. The 1995 amount primarily represents the proceeds
from the sale of the discontinued operations and a change in the Company's
strategy to satisfy state regulations for landfill closure and post-closure
offset by continued landfill development costs. The 1994 amount primarily
represents acquisitions of environmental companies and continued landfill
development costs.
Net cash (used in) provided by financing activities was $(24,643) and $22,244
for 1995 and 1994, respectively. The 1995 amount primarily represents the
Company paying off the outstanding balance on the environmental subsidiaries
line of credit. The 1994 amount primarily represents borrowings on the
environmental line of credit.
Net working capital as of December 31, 1995 was approximately $5,653, compared
to approximately $1,259 as of December 31, 1994. This increase is primarily
attributable to the remaining proceeds from the sale of the discontinued
operations, offset by the use of short-term investments to fund landfill
development costs.
As of December 31, 1995, the Company had approximately $23,526 available under
its line of credit. The line of credit is secured by substantially all of the
Company's assets and bears interest at rates ranging from the Eurodollar rate
plus 1.75% to 2.75% to the bank's base rate plus 0% to .75%. During 1995, the
Company repaid in full all outstanding borrowings under the line of credit with
the proceeds from the sale of the Company's non-environmental assets. The
maximum amount available under the line of credit, which expires July 31, 1997,
is $50,000, offset by issued letters of credit of approximately $26,474.
The Company has various operating and capital leases for transportation and
other equipment. Total noncancelable minimum lease payments for 1996
approximate $4,184.
During 1994, the Company acquired a landfill near Macon, Georgia. At the time
of acquisition, the existing landfill operation was permitted solely to accept
construction and demolition waste and certain industrial wastes. A new permit
allowing the landfill to accept municipal solid waste was issued in June 1994.
After legal challenges, the permit finally became non appealable in October,
1995 and an additional payment of approximately $3,600 was made to the seller
in 1995.
There are certain environmental contingencies, primarily consisting of landfill
closure obligations, related to the Company's integrated solid waste disposal
system operations. The Company estimates and records its costs associated with
closure and post-closure monitoring and maintenance for operating landfills
based upon relevant government regulation. Accruals for these closure and post-
closure costs are provided as permitted airspace of the landfill is consumed.
The Company revises its estimates on a periodic basis. As of December 31, 1995,
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<PAGE>
the Company had accrued expenses for closure costs of approximately $5,168.
Because of the long-term nature of these obligations, there is a possibility
that such obligations, when ultimately paid, may differ substantially from the
recorded accrued expense, thus affecting the Company's liquidity.
Considering the existing accruals with respect to the Company's landfills at
December 31, 1995, and assuming significant additional future capital costs are
made to complete expansion efforts over the expected lives of the landfills,
approximately $70,000 of additional expense accruals are to be provided over the
remaining lives as permitted airspace of these facilities is consumed. Such
additional accruals to be provided have been estimated based on current costs
and existing regulatory requirements and assume that the landfills will be
filled to capacity. Due to uncertainties and significant judgments used in
determining the amount of additional accruals to be provided, the actual amount
to be expended may differ substantially.
The Company is required to provide financial assurance to various regulatory
bodies for certain of its estimated closure and post-closure monitoring and
maintenance costs. The Company has provided letters of credit and established
trust funds in response to such requirements.
The Company projects capital expenditures for existing landfill facilities for
1996 to be $15,400, although the amounts expended may differ substantially from
this amount. The Company is actively pursuing additional landfill facilities
through acquisitions, privatization of municipally owned facilities, as well as
start-up facilities. In addition to planned expenditures for existing
facilities, the Company anticipates that the Person County landfill and the new
Mid-State landfill will be constructed in 1996 at a cost of approximately an
additional $10,600, but there can be no assurance that these landfills will
become operational in 1996 nor that the amounts actually expended will not
differ substantially from this amount.
The Company believes that its present financial condition, considering the funds
available under the existing financing agreements and internal financial
resources, provides adequate capital reserves and liquidity.
Inflation has not had a significant effect on the Company's business, primarily
because the United Sates economy has been experiencing a period of relatively
low inflation.
The Company's capital needs, earnings and cash flow are somewhat dependent on
events beyond the Company's control, such as the state of the economy, changes
in existing governmental and environmental regulations and the availability of
expansion opportunities.
Environmental Matters
The Company, during its normal course of business, is faced with the need to
expend funds for environmental protection and remediation, however, such
expenditures are not expected to have a materially adverse effect on its
financial condition or results of operations considering its business is based
upon compliance with environmental laws and regulations and its services are
priced accordingly. Though it is possible that such costs might increase in the
future, the Company believes that in general it benefits from increased
government regulation based on an increased demand for its services and adequate
resources and experience to manage environmental risk.
As part of its ongoing operations, the Company provides for its estimated
closure and post-closure monitoring and maintenance costs as remaining;
permitted airspace at its landfill facilities are
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<PAGE>
consumed. Closure and post-closure monitoring and maintenance costs include
final capping of the site, site inspections, groundwater monitoring, leachate
management, methane gas control and recovery, and operation and maintenance
costs as the remaining permitted airspace of such facilities is consumed.
-26-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
See accompanying Table of Contents to Consolidated Financial Statements
and Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-27-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The following information is furnished as of March 15, 1996, with respect
to the executive officers and directors of the Company.
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Howard P. Berkowitz 55 Chairman of the Board
Jack T. Baker 45 President
R. Douglas Striebel 38 Vice President, Treasurer and Chief Financial Officer
Larry Addington 60 Director
Stephen Addington 29 Director
Harold Blumenstein 58 Director
Jack C. Fisher 67 Director
James Grosfeld 58 Director
Richard Ravitch 62 Director
</TABLE>
All directors hold office until the next annual meeting of stockholders
and until their successors are elected and qualified. Officers serve at the
discretion of the Board of Directors. All officers spend substantially full
time working for the Company or its subsidiaries.
Howard P. Berkowitz has been Chairman of the Board of Directors of the
Company since August 1995, and had previously been a director of the Company
from April 1995 to July 1995. Mr. Berkowitz has served as the managing partner
of HPB Associates, L.P., ("HPB"), a private investment partnership, since 1979.
Mr. Berkowitz is also a director of Pulte Corporation.
Jack T. Baker was appointed President of the Company effective February 2,
1996. Since 1990, Mr. Baker has served the Company's environmental operations
in various capacities, including as Executive Vice President, General Counsel,
and President of Addington Environmental, Inc.
R. Douglas Striebel has served as Vice President and Chief Financial
Officer of the Company since 1988. From 1984 until joining the Company, Mr.
Striebel was an Audit Manager with Arthur Andersen & Co.
Larry Addington has served as director of the Company since its
organization in 1986. Mr. Addington served as Chief Executive Officer of the
Company from its organization until September 22, 1995, and as President of the
Company from its organization until June 30, 1994. Mr. Addington currently
serves as Chief Executive Officer of Addington Enterprises, Inc., a coal mining
and mining equipment manufacturing and licensing corporation.
Stephen Addington has served as a director of the Company since October 17,
1995. Mr. Addington served as Vice President of Operations for the Company's
environmental subsidiary from 1992 to August 1995. From 1990 to 1992, Mr.
Addington served as a regional
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<PAGE>
manager for a coal subsidiary of the Company. Mr. Addington currently serves
as General Manager of Addington Enterprises, Inc.
Harold Blumenstein has served as a director of the Company since August
1995. Mr. Blumenstein is a general partner of Paragon Properties Company, a
real estate development, investment and management company, where he has been
employed since 1971. Mr. Blumenstein is also a director of Copart, Inc.
Jack C. Fisher has served as a director of the Company since 1987. Mr.
Fisher served as mayor of Owensboro, Kentucky from 1984 to 1987. He is
currently retired. Before 1984, Mr. Fisher served as manager of U. S. Postal
service mail processing operations in Owensboro, Kentucky.
James Grosfeld has served as a director of the Company since August 1995.
Mr. Grosfeld, an independent investor, served as Chairman of the Board and Chief
Executive Officer of Pulte Corporation, a homebuilding corporation, from 1974 to
1990. In addition to serving as Co-Chairman of the Executive Committee, Mr.
Grosfeld serves as consultant and director of Pulte Corporation, and a director
of each of the publicly-traded BlackRock Financial Management funds. Mr.
Grosfeld is a director of Copart, Inc. and from 1993 until November 1994, he
also served as Chairman of the Board of Copart, Inc.
Richard Ravitch has been a director of the Company since August 1995, and
had previously been a director of the Company from April 1995 to July 1995. Mr.
Ravitch has served as the Chairman of Aquarius Management Corporation, a real
estate management company, for over five years. Mr. Ravitch served as the
president of the Players Relations Committee of Major League Baseball from
November 1991 to December 1994. Mr. Ravitch also serves as a director of
Parsons Brinckerhoff Inc.
In 1990, the Commodity Futures Trading Commission ("CFTC") brought a civil
action against MultiVest Options, Inc., ("MOI") alleging various violations of
the Commodity Exchange Act ("CEA") and certain rules and regulations of the
CFTC. Mr. Grosfeld was the principal stockholder of the ultimate parent
corporation of MOI, but, according to Mr. Grosfeld, was never an officer or
director of MOI and did not participate in the day-to-day conduct of its
business. Without admitting or denying the allegations of the CFTC complaint,
MOI consented to the entry of a permanent injunction and appointment of a
receiver. MOI discontinued its business operations in 1990. Mr. Grosfeld was
not specifically named in the CFTC proceeding or in the injunction related
thereto. Subsequently, in 1990 certain individuals who had previously purchased
and sold commodity options through MOI brought a class action lawsuit against
the parent and affiliated companies of MOI and Mr. Grosfeld alleging that the
defendants, among other things, violated the antifraud provisions of the CEA and
asserting other federal and state law claims. Mr. Grosfeld, who believes that
the litigation is without merit, had denied all such allegations and is
vigorously defending such litigation.
HPB entered into a Stock Purchase Agreement dated as of August 4, 1995 (the
"Stock Purchase Agreement"), with Larry Addington, Robert Addington and Bruce
Addington pursuant to which HPB agreed to purchase an aggregate of 2,000,000
shares of Common Stock from Messrs. Addington at $9.00 per share. Pursuant to
the terms of the Stock Purchase Agreement, HPB purchased 577,003 shares of
Common Stock on August 4, 1995. On August 24, 1995, HPB purchased the remaining
1,422,997 shares of Common Stock.
On August 4, 1995, the Board was reconstituted to consist of eight
members, four of whom were already members of the Board (Larry Addington, Bruce
Addington, Messrs. Fisher and Whitehouse) and four of whom were not on the
Board at such time (Messrs. Berkowitz, Blumenstein, Grosfeld and Ravitch). The
four new directors were designated by HPB, and Mr.
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<PAGE>
Berkowitz was appointed as Chairman of the Board. Bruce Addington resigned from
the Board on August 15, 1995.
The terms of the Stock Purchase Agreement include certain voting
agreements. Among other things, Messrs. Addington agreed that, until August 31,
1997, (i) if the number of Addington Designees (as hereinafter defined) are
included as part of the management slate of nominees for the Board, they will
vote all of their Common Stock in favor of the management slate of nominees for
the Board in each election of directors of the Corporation and (ii) Messrs.
Addington will not, directly or indirectly, solicit, nor participate in the
solicitation of, proxies or consents in opposition to the management slate of
nominees to the Board provided it includes the number of Addington Designees
specified below, nor may they, directly or indirectly, solicit, nor participate
in the solicitation of, proxies or consents to increase their representation on
the Board to a number of persons in excess of the number of Addington Designees.
HPB agreed that it will recommend inclusion in management's slate of
nominees to the Board, and vote all of its Common Stock in favor of, three
persons designated by Messrs. Addington (one of whom shall be Larry Addington)
in each election of directors of the Company (the "Addington Designees");
provided, that HPB shall not be obligated to recommend inclusion of, or to
vote in favor of (i) more than two Addington Designees if Messrs. Addington
shall then beneficially own less than 3,000,000 shares of Common Stock, (ii)
more than one Addington Designee if Messrs. Addington shall then beneficially
own less than 2,000,000 shares of Common Stock or (iii) any Addington Designee
if Messrs. Addington shall then beneficially own less then 1,000,000 shares of
Common Stock.
The Addington Designees elected at the annual meeting of the Company's
stockholders in 1995 consist of Larry Addington, Stephen Addington and Jack C.
Fisher. Larry Addington and Stephen Addington are brothers.
Compliance with Section 16(a) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's common stock, to file reports (including a year-end report) of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of all reports filed.
Based solely on a review of the forms furnished to the Company, or
written representations from certain reporting persons, the Company believes
that all persons who were subject to Section 16(a) in 1995 complied with the
filing requirements except that Stephen Addington, a director, was late in
filing one Form 4 to report the exercise of stock options and Robert Addington
was late in filing one Form 4 to report the sale of common stock.
-30-
<PAGE>
Limitation on Liability of Directors
- ------------------------------------
Pursuant to the Company's Certificate of Incorporation, no director
shall be personally liable to the Company or its stockholders for monetary
damages for breach of his fiduciary duty as a director, except for a breach of
the director's duty of loyalty, for acts and omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, for
transactions from which a director derived an improper personal benefit or for
unlawful payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the Delaware General Corporation Law. This provision offers
persons who serve on the Board of Directors of the Company protection against
awards of monetary damages for negligence in the performance of their duties.
It does not affect the availability of equitable remedies such as an injunction
or rescission based upon a director's breach of the duty of care.
In addition, the Company has entered into Indemnity Agreements with
its executive officers and directors which establish contractual rights for the
executive officers and directors to be indemnified by the Company to the fullest
extent permitted by law.
-31-
<PAGE>
Item 11. Executive Compensation.
The following table sets forth the aggregate cash compensation paid by
the Company for 1995, 1994 and 1993 to the most highly compensated executive
officers of the Company whose salary and bonus compensation exceeded $100,000 in
1995, and who were serving at the end of the year, along with two executive
officers who would have otherwise been included in such table but were not
serving as executive officers at the end of the year.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------- ------------ -------------
Name and Principal All Other
Position Year Salary Bonus Compensation Options (#)
- ---------------------------------------- ---- -------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
Larry Addington/(1)/ 1995 $211,539 $ - 0 - $ - 0 - - 0 -
Chief Executive Officer and Director 1994 276,000 - 0 - - 0 - - 0 -
1993 274,134 - 0 - - 0 - - 0 -
Kirby J. Taylor/(2)/ 1995 $250,000 $500,000 $ 8,475/(3)/ 20,000
President 1994 107,658 100,000 $ - 0 - 40,000
Robert Addington/(4)/ 1995 $173,077 $ - 0 - $ 4,500/(5)/ - 0 -
Vice President - Operations and 1994 226,000 - 0 - 3,855/(5)/ - 0 -
Engineering 1993 224,134 - 0 - - 0 - - 0 -
R. Douglas Striebel 1995 $139,893 $175,000 $ - 0 - 100,000
Vice President, Chief Financial Officer 1994 132,250 250,000 - 0 - 25,000
1993 128,403 - 0 - - 0 - - 0 -
- ---------------
</TABLE>
/(1)/Mr. Addington resigned as Chief Executive Officer effective September 22,
1995.
/(2)/Employment began on June 28, 1994. Mr. Taylor resigned effective January
12, 1996.
/(3)/Includes employer matching contribution of $4,500 to the Company's 401(k)
savings plan and a $3,975 premium on term life insurance with a
$750,000 death benefit.
/(4)/Mr. Addington resigned as Vice President effective September 22, 1995.
/(5)/Represents employer matching contributions to the Company's 401(k)
savings plan.
The Company entered into an employment agreement with Kirby J. Taylor.
Pursuant to the employment agreement, Mr. Taylor was employed as the President
and Chief Operating Officer of the Company at an annual base salary of $250,000,
subject to annual increases. Mr. Taylor received a signing bonus of $100,000.
The employment agreement provided that Mr. Taylor would initially receive
options for 40,000 shares, and subsequently receive grants of options for 20,000
shares per year for three years, for an aggregate of 100,000 shares. The
agreement provided that if Mr. Taylor was discharged for any reason other than
cause, as defined, the Company would pay him an amount equal to twice his base
salary unless such termination was because of Mr. Taylor's death or retirement,
or by the Company for gross
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<PAGE>
negligence or willful misconduct. The employment agreement provided for an
annual performance bonus to be awarded based on specific criteria. The Company
also provided Mr. Taylor the use of an automobile, limited country club dues,
and a term life insurance policy with a death benefit of $750,000. In connection
with Mr. Taylor's resignation effective January 12, 1996, the Company paid Mr.
Taylor $200,000 in full satisfaction of its obligations under the employment
agreement.
The Company has entered into an employment agreement with R. Douglas
Striebel. Pursuant to the employment agreement, Mr. Striebel will be employed
as Chief Financial Officer of the Company at the rate of $150,000 per annum.
Mr. Striebel may receive bonuses awarded in the sole discretion of the Board of
Directors. The agreement provides generally that if Mr. Striebel's employment
is terminated without Cause (as defined) or he quits for Good Reason (as
defined), he will be entitled to an amount equal to one year's base salary as in
effect immediately before his termination. In addition, the agreement provides
Mr. Striebel with certain benefits following a Change of Control (as defined).
Generally, if within three years following the occurrence of any Change of
Control or the execution of a definitive agreement by the Company for a
transaction which would result in a Change of Control, either (i) the Company
terminates Mr. Striebel's employment without Cause or (ii) he quits for Good
Reason within one year of the occurrence of the event or circumstances
constituting Good Reason, he is entitled to receive an amount equal to three
times the greater of (i) his annual salary in effect immediately before the
Change of Control, and (ii) his annual salary in effect immediately prior to the
date of termination.
Compensation of Directors
Directors of the Company who are also officers of the Company receive
no compensation for their services as directors. During 1995, the Company's
standard directors fees for non-management directors were a base salary of
$10,000 per year for services as directors, with an additional $1,000 per Board
meeting actually attended, and $500 for each committee meeting actually attended
which was not held in conjunction with a meeting of the Board of Directors.
On March 1, 1995, the Company received a proposal from Larry
Addington, Robert Addington and Bruce Addington to purchase the Company's non-
environmental businesses. The Company's Board of Directors authorized a special
committee comprised of the Company's non-management directors (Messrs.
Berkowitz, Fisher, Ravitch, Carl R. Whitehouse and Stephen D. Weinress) to
evaluate the proposal. The special committee was terminated following the
withdrawal of this proposal on July 11, 1995. In connection with service on the
special committee, each of the directors received $20,000, in lieu of any fees
otherwise due the members for attendance at the committee's meetings.
Stock Option Plan
During 1988, the Company adopted, with stockholder approval, the
Restated Stock Option Plan (the "Option Plan"). The purposes of the Option Plan
are to encourage certain officers, employees, and independent contractors to use
their best efforts for the Company's success and to provide a valuable means of
retaining key personnel as well as attracting new personnel when needed for
future operations and growth.
Pursuant to the Option Plan, the Company has reserved for issuance
1,500,000 shares of Common Stock for which options may be granted by the Option
Committee of the Board of Directors to officers, employees and independent
contractors of the Company and its subsidiaries in amounts and upon terms and
conditions to be determined from time to time by the Option Committee. During
1995, no options were exercised by any of the executive officers named in the
Summary Compensation Table above.
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<PAGE>
Option Grants in 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Team
--------------------
% of Total
Options Granted
Options to Employees Exercise Expiration
Name Granted (#) in 1994 Price ($/Sh) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Larry Addington -0- N/A N/A N/A N/A N/A
Kirby J. Taylor 20,000(1) 9.1% $13.75 06/27/05 $172,946 $ 438,279
Robert Addington -0- N/A N/A N/A N/A N/A
R. Douglas Striebel 100,000(2) 45.5% $ 9.50 03/30/05 $597,450 $1,514,055
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options become exercisable in one-third increments on June 28, 1996, June
28, 1997 and June 28, 1998. These options were terminated in connection
with Mr. Taylor's resignation in January 1996.
(2) Options are exercisable as follows: 50,000 shares on October 31, 1995,
16,667 shares on August 4, 1996, 16,666 shares on August 4, 1997, and
16,667 shares on August 4, 1998.
<TABLE>
Aggregated 1995 Year-End Option Value
- -----------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options at Year End (#) Options at Year End ($)(1)
------------------------ --------------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- --------------------- ------------------------ ---------------------------------
<S> <C> <C>
Larry Addington N/A N/A
Kirby J. Taylor 13,333/46,667(2) 64,998/$147,502(2)
Robert Addington N/A N/A
R. Douglas Striebel 50,000/80,000 256,250/$413,750
- -------------------
</TABLE>
(1) Dollar amounts reflect market value of Common Stock based on December 29,
1995 price per share of $14.625; minus the exercise price.
(2) All unexercisable options were terminated in connection with Mr. Taylor's
resignation in January 1996.
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<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Except as otherwise noted in the footnote following the table, the
following table sets forth certain information concerning ownership of the
Common Stock as of March 15, 1996, by each director, each executive officer
named in Item 11 currently serving the Company, each person or entity who is
known to the Company to be the beneficial owner of more than 5% of the Common
Stock and all current directors and executive officers of the Company as a
group. Except as otherwise noted in the footnote following the table, each
beneficial owner listed below has sole voting and dispositive power with respect
to the shares listed next to his name.
<TABLE>
<CAPTION>
Shares
Name and Address Beneficially Percentage
of Beneficial Owner Owned of Class
- ----------------------------------------- ---------------- -----------
<S> <C> <C>
Morgan Stanley Asset Management Limited
25 Cabot Square
Canary Wharf
London, E14 4QA England 1,061,750(1) 7.0%
Howard P. Berkowitz
HPB Associates, L.P.
888 Seventh Avenue
New York, New York 10106 2,455,285(2) 16.2%
Larry Addington
1500 North Big Run Road
Ashland, KY 41102 2,263,324(3) 14.9%
Robert Addington
1500 North Big Run Road
Ashland, KY 41102 980,000(3) 6.5%
Bruce Addington
1500 North Big Run Road
Ashland, KY 41102 914,006(3) 6.0%
Stephen Addington 10,000 *
Harold Blumenstein 100,000(2) *
Jack C. Fisher 2,500 *
James Grosfeld 155,000(2)(4) 1.0%
Richard Ravitch 10,000(2) *
R. Douglas Striebel 50,000(5) *
All directors and executive officers as
a group (9 persons) 5,096,109(6) 33.4%
</TABLE>
_______________
*Represents less than 1% of outstanding shares.
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<PAGE>
(1) Morgan Stanley Asset Management Limited is an investment advisory
subsidiary of Morgan Stanley Group, Inc., 1585 Broadway, New York, New York
10036. Each of these entities shares voting and dispositive power with
respect to the 1,061,750 shares with holders of accounts managed on a
discretionary basis by Morgan Stanley Asset Management Limited. In addition
to these shares, Morgan Stanley Group Inc. shares voting and dispositive
powers with respect to 4,500 shares. Information concerning these entities
is according to a Schedule 13G, as amended February 13, 1996.
(2) A group consisting of HPB Associates, L.P., Messrs. Berkowitz, Blumenstein,
Grosfeld and Ravitch, and certain other limited and members of the general
partner of HPB Associates, L. P., beneficially owns 3,008,785 shares,
including the shares set forth above. Each member of the group has the
power to vote and dispose of the shares held by him, and no member has the
power to vote and dispose of the shares held by another member of the
group, other than with respect to shares beneficially owned by HPB
Associates L.P., which power to vote and dispose of such shares may be
exercised by the managing member of its general partner, Mr. Berkowitz.
(3) As a group, Larry Addington, Robert Addington, and Bruce Addington
beneficially own 4,157,330 shares, including the shares set forth above.
(4) Includes 100,000 shares for which Mr. Grosfeld shares voting and
dispositive powers with his wife.
(5) Includes currently exercisable options for 50,000 shares.
(6) Includes currently exercisable options for 100,000 shares. The percentage
of Common Stock beneficially owned by the group is calculated on the basis
of the amount of outstanding securities plus the currently exercisable
options.
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<PAGE>
Item 13. Certain Relationships and Related Transactions.
On September 22, 1995, the Company entered into a stock purchase agreement
with Addington Acquisition Company, Inc., Larry Addington, Robert Addington and
Bruce Addington (collectively, the "Addington Brothers") whereby the Company
agreed to sell, for $30,000,000 subject to certain working capital adjustments,
all the issued and outstanding shares of common stock of Addington Mining, Inc.,
Mining Technologies, Inc., Addwest Mining, Inc. and Addington Coal Holding, Inc.
In addition, the Company retained the right to receive certain payments
(anticipated to aggregate $3,000,000 after December 31, 1995) due under the
Company's technology sale to BHP Australia Coal Pty. Ltd. The sale was
consummated on November 2, 1995.
Included in this transaction and pursuant to an option agreement date
August 4, 1995, the Company sold to the Addington Brothers all of the issued and
outstanding shares of common stock of the Company's subsidiary, Tennessee
Mining, Inc. The Company is entitled to receive a royalty based on tons of coal
delivered under a certain coal sales contract, up to a maximum aggregate royalty
of $12,500,000.
On September 22, 1995, the Company entered into an agreement to sell all of
the issued and outstanding shares of Common Stock of its subsidiary, Belize
River Fruit Co., to Larry and Bruce Addington in exchange for 1,000,000 shares
of Common Stock of the Company owned by Larry and Bruce Addington. This
transaction was consummated on November 2, 1995.
Before the consummation of the transaction with the Addington Brothers on
November 2, 1995, TASK Trucking Company ("TASK") provided trucking services to
the Company. TASK is owned by a brother-in-law of the Addington Brothers. During
1995, the Company's expense was $2,497,000 for trucking services provided
through TASK.
Larry Addington owns a 50% interest in an office building in Owensboro,
Kentucky in which the Company's subsidiary, Addwest Mining, Inc., leased
approximately 7,300 square feet of office space for an annual rent of $117,350
during 1995 plus utilities. The Company sold Addwest Mining, Inc. to the
Addington Brothers on November 2, 1995.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) List of Financial Statements Filed. See accompanying Index
to Consolidated Financial Statements and Schedules.
(a)(2) List of Financial Statement Schedules Filed. See
accompanying Index to Consolidated Financial Statements and
Schedules.
(a)(3) List of Exhibits Filed.
(3)(A)/1/ Restated Certificate of Incorporation of Registrant.
(B) Bylaws of Registrant.
(10)(A) Employment Agreement between Jack T. Baker and the
Registrant. Compensation Agreement required to be filed.
(B) Employment Agreement between R. Douglas Striebel and the
Registrant, as amended. Compensation Agreement required to
be filed.
(C)/2/ Employment Agreement effective as of June 2, 1995, between
Kirby J. Taylor and the Registrant. Compensation Agreement
required to be filed.
(D)/3/ Addington Resources, Inc. Restated Stock Option Plan, as
amended. Compensation Agreement required to be filed.
(E)/3/ Form of Indemnity Agreement between the Registrant and its
directors and officers. Compensation Agreement required to
be filed.
(F)/2/ Amended and Restated Revolving Credit Agreement dated as of
May 31, 1994, by and among Addington Environmental, Inc.
("AEI"), Green Valley Environmental Corp., Mid-State
Environmental, Inc., and certain AEI subsidiaries, and The
First National Bank of Boston, and Continental Bank N.A., as
amended June 30, 1994, October 12, 1994, and February 21,
1995.
(G) Fourth Amendment dated December 15, 1995 and Fifth Amendment
dated January 24, 1996 to Amended and Restated Revolving
Credit Agreement dated as of May 31, 1994 as set forth at
Exhibit 10(F) of this Form 10-K.
(11) Statement re computation of per share earnings. See page F-26 of the
audited Consolidated Financial Statements and Schedules filed as
part of this report.
(21) List of subsidiaries of Registrant.
(23) Consent of Arthur Andersen LLP
(27) Financial Data Schedule
____________________
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<PAGE>
/1/Incorporated by reference to the Registration Statement on
Form S-1 [File No. 33-22164].
/2/Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 [File
No. 0-16498].
/3/Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 [File
No. 0-16498].
(b) Reports on Form 8-K.
During the quarter ended December 31, 1995, the Company filed a
Current Report on Form 8-K dated November 1, 1995, concerning Item 2,
Acquisition or Disposition of Assets, reporting the Company's sale of
its coal mining, mining technology and citrus operations to Larry
Addington, Bruce Addington and Robert Addington and proposed sale of
gold operations. As subsequently amended by Form 8-K/A filed November
17, 1995, the following financial statements were filed: (i) Pro Forma
Condensed Consolidated Balance Sheet as of September 30, 1995; (ii)
Pro Forma Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1995; and (iii) Pro Forma Condensed
Consolidated Statement of Operations for the Year ended December 31,
1994.
(c) Exhibits.
The exhibits listed in response to Item 14(a)(3) are filed as a part
of this report.
(d) Financial Statement Schedules.
The financial statement schedules listed in response to Item 14(a)(2)
are filed as part of this report.
-39-
<PAGE>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS TO
CONSOLIDATED FINANCIAL STATEMENTS & SCHEDULES
<TABLE>
<CAPTION>
Page(s)
-----------
<S> <C>
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of
December 31, 1995 and 1994 F-3 to F-4
Consolidated Statements of Operations for the
years ended December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Changes in
Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993 F-7 to F-8
Notes to Consolidated Financial Statements F-9 to F-25
Exhibit 11 -- Calculations of Net Income (Loss) Per Share F-26
</TABLE>
Schedule to Consolidated Financial Statements:
All schedules have been omitted since the required information is not present or
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Addington Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Addington
Resources, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Addington Resources, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- -----------------------
ARTHUR ANDERSEN LLP
Louisville, Kentucky
February 29, 1996
F-2
<PAGE>
<TABLE>
<CAPTION>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
AS OF DECEMBER 31,
----------------------------
1995 1994
---------- ----------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,387 $ 2,719
Short-term investments ---- 1,474
Accounts receivable, net of allowance for doubtful accounts
of $1,100 and $358 for 1995 and 1994, respectively 9,090 7,011
Prepaid expenses and other 2,626 193
Deferred tax benefits 620 ----
---------- ----------
Total current assets 15,723 11,397
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost 119,414 89,537
Less accumulated depreciation (13,667) (8,020)
---------- ----------
105,747 81,517
---------- ----------
PROPERTY, PLANT AND EQUIPMENT and
other long-term assets of discontinued operations, net ---- 91,490
DEFERRED TAX BENEFITS 4,922 ----
RESTRICTED CASH 40 4,348
OTHER 1,850 5,569
---------- ----------
Total Assets $128,282 $194,321
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE>
<TABLE>
<CAPTION>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
AS OF DECEMBER 31,
----------------------------
1995 1994
---------- ----------
(in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,743 $ 3,183
Current portion of long-term debt 1,823 880
Accrued expenses and other 3,504 5,386
Net current liabilities of discontinued operations ---- 689
--------- ---------
Total current liabilities 10,070 10,138
--------- ---------
NON-CURRENT LIABILITIES:
Long-term debt, less current portion 14,407 32,767
Accrued closure and post-closure costs 5,168 2,784
Other long-term liabilities 7,451 2,981
Deferred income taxes ---- 566
Long-term liabilities of discontinued operations ---- 24,864
--------- ---------
Total non-current liabilities 27,026 63,962
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value; 30,000,000 shares authorized,
16,054,301 shares and 15,852,851 shares outstanding at
December 31, 1995 and 1994, respectively 16,054 15,853
Paid-in capital 85,934 83,789
Retained earnings 2,823 20,579
Less treasury stock; 1,000,000 shares in 1995, at cost (13,625) ----
--------- ---------
Total stockholders' equity 91,186 120,221
--------- ---------
Total liabilities and stockholders' equity $128,282 $194,321
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
LIABILITIES AND STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
---------- ---------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C>
REVENUES $ 56,739 $ 36,057 $ 22,600
COSTS AND EXPENSES:
Cost of operations 30,574 19,665 10,966
Provision for asset write-down ---- 670 5,122
Depreciation and amortization 7,506 4,133 2,728
Selling, general and administrative 6,631 7,119 6,503
---------- ---------- ----------
44,711 31,587 25,319
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 12,028 4,470 (2,719)
---------- ---------- ----------
INTEREST AND OTHER INCOME (EXPENSE):
Interest income 444 772 ----
Interest expense (955) (277) ----
Other, net (17) (975) 10
---------- ---------- ----------
(528) (480) 10
---------- ---------- ----------
Income (loss) before income tax provision (benefit) 11,500 3,990 (2,709)
INCOME TAX PROVISION (BENEFIT) 4,426 1,596 (1,029)
---------- ---------- ----------
Net income (loss) from continuing operations 7,074 2,394 (1,680)
---------- ---------- ----------
DISCONTINUED OPERATIONS:
Income (loss) from operations of discontinued segment
(less applicable income taxes (benefit) of $1,899, $(5,380)
and $(4,388) for 1995, 1994 and 1993, respectively) 5,707 (9,528) (14,509)
Loss on disposal of segment (less applicable income
tax benefit of $10,000) (30,537) ---- ----
---------- ---------- ----------
Loss from discontinued operations (24,830) (9,528) (14,509)
---------- ---------- ----------
NET LOSS $ (17,756) $ (7,134) $ (16,189)
========== ========== ==========
EARNINGS PER SHARE:
Income (loss) from continuing operations $ 0.45 $ 0.15 $ (0.11)
Income (loss) from discontinued operations 0.36 (0.60) (0.93)
Loss on disposal of segment (1.94) ---- ----
---------- ---------- ----------
Net loss per share $ (1.13) $ (0.45) $ (1.04)
========== ========== ==========
Equivalent shares of stock outstanding 15,748 15,798 15,563
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
COMMON STOCK
-------------------------------
SHARES
-------------------- PAID-IN RETAINED TREASURY
AUTHORIZED ISSUED AMOUNT CAPITAL EARNINGS STOCK TOTAL
---------- ------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 30,000 15,241 $15,241 $77,668 $ 43,902 $ -- $136,811
Issuance of common stock upon
exercise of stock options -- 434 434 3,877 -- -- 4,311
Net loss -- -- -- -- (16,189) -- (16,189)
------ ------ ------- ------- -------- -------- --------
Balance, December 31, 1993 30,000 15,675 $15,675 $81,545 $ 27,713 $ -- $124,933
Issuance of common stock upon
exercise of stock options -- 29 29 312 -- -- 341
Issuance of common stock upon
acquisition of subsidiary -- 149 149 1,932 -- -- 2,081
Net loss -- -- -- -- (7,134) -- (7,134)
------ ------ ------- ------- -------- -------- --------
Balance, December 31, 1994 30,000 15,853 $15,853 $83,789 $ 20,579 $ -- $120,221
Issuance of common stock upon
exercise of stock options -- 75 75 645 -- -- 720
Issuance of common stock upon
exercise of stock grants -- 126 126 1,500 -- -- 1,626
Treasury stock received upon
disposal of subsidiary -- -- -- -- -- (13,625) (13,625)
Net loss -- -- -- -- (17,756) -- (17,756)
------ ------ ------- ------- -------- -------- --------
Balance, December 31, 1995 30,000 16,054 $16,054 $85,934 $ 2,823 $(13,625) $ 91,186
====== ====== ======= ======= ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(17,756) $ (7,134) $(16,189)
-------- -------- --------
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 7,506 4,133 2,728
(Gain) loss on disposal and write downs of assets (12) 2,035 827
Loss from discontinued operations 24,830 9,528 14,509
Change in assets and liabilities, net of effects from acquisitions
and disposals--
(Increase) decrease in--
Accounts receivable (2,079) (628) (3,240)
Prepaid expenses and other (2,433) 732 (279)
Deferred income taxes (6,108) (2,504) 759
Other assets 186 (1,458) (243)
Increase (decrease) in--
Accounts payable 1,560 216 1,085
Accrued expenses and other 3,360 3,197 3,140
Accrued closure and post-closure costs 2,384 1,477 1,022
Other long-term liabilities 4,470 2,306 --
-------- -------- --------
Total adjustments 33,664 19,034 20,308
-------- -------- --------
Net cash provided by operating activities 15,908 11,900 4,119
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets, net of disposal costs 4,125 -- --
Proceeds from sale of discontinued operations, net of disposal costs 34,286 -- --
(Increase) decrease in--
Restricted cash 4,308 (2,449) 245
Short-term investments 1,474 (1,474) --
Additions to property, plant and equipment (27,986) (23,525) (18,516)
Acquisition of environmental companies, net of cash acquired -- (1,863) --
Net (increase) decrease in investment in discontinued operations (6,804) (2,913) 4,944
-------- -------- --------
Net cash provided by investing activities $ 9,403 $(32,224) $(13,327)
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<PAGE>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CON'T)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
-----------------------------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt $ 11,410 $26,064 $ --
Repayments of long-term debt (36,773) (3,891) (668)
Issuance of common stock 720 341 4,311
Borrowings (repayments) on revolving line of credit -- (57) 6,030
Financing costs incurred -- (213) --
-------- ------- ------
Net cash provided by (used in) financing activities (24,643) 22,244 9,673
-------- ------- ------
Net increase in cash and cash equivalents 668 1,920 465
CASH AND CASH EQUIVALENTS, beginning of year 2,719 799 334
-------- ------- ------
CASH AND CASH EQUIVALENTS, end of year $ 3,387 $ 2,719 $ 799
======== ======= ======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-8
<PAGE>
ADDINGTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
1. Summary of Significant Accounting Policies
a. Financial Statement Presentation and Preparation-
The accompanying consolidated financial statements as of December 31,
1995, 1994 and 1993 include the accounts of Addington Resources, Inc.
(the Company) and its wholly-owned subsidiary, Addington Holding
Company, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Certain
1994 and 1993 amounts have been reclassified to conform to 1995
presentation with no effect on net loss.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
b. Company Environment and Risks-
The Company's continuing operations are within one segment
(Environmental) and consist of providing waste collection services to
residential and commercial customers and operating landfills for waste
disposal. The majority of these operations (and revenues) are located
in the Southeastern United States (U.S.), with emphasis in Kentucky
and North Carolina.
The environmental industry exposes the Company to a number of risks
including: the possibility of the termination of waste service
agreements, fluctuating market and competitive conditions, changing
governmental regulations, loss of key employees and the ability of the
Company to obtain the necessary permits to construct, expand and
operate its landfills.
The Company recognizes revenue for its waste collection services as
such services are provided. Services are generally billed in advance
and are recorded as deferred revenues until services are performed.
Revenues for the Company's landfills are recognized as waste is
received.
The Company grants credit to its customers based on their
creditworthiness and generally does not secure collateral for its
receivables.
c. Depreciation and Amortization-
Property, plant and equipment are stated at cost. Expenditures for
major additions and improvements are capitalized, while minor
replacements, maintenance and repairs are charged to operations as
incurred. Depreciation and amortization are provided using either the
straight-line or units produced or consumed methods. The following
estimated useful lives are used under the straight-line method:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 10-20
Machinery and transportation equipment 3-15
Furniture, fixtures and office equipment 5-10
</TABLE>
F-9
<PAGE>
Capitalized landfill development costs (included in Property, Plant
and Equipment) are amortized as permitted airspace of the landfill or
the related cell, as applicable, is consumed. Units-of-consumption
amortization rates applicable to each of the Company's operating
landfills are determined annually. The rates are based on estimates
made by Company and independent engineers, considering the information
provided by aerial surveys which are generally performed annually.
Financing costs (included in Other Assets) are being amortized using
the straight-line method, over the life of the related debt, which
approximates the effective interest rate method.
Intangible assets (included in Other Assets) primarily consist of
customer lists and covenants not to compete. These assets are
amortized over their estimated useful lives, usually no longer than
twenty years and five years, respectively, using the straight-line
method.
d. Restricted Cash-
The Company sometimes pays amounts into escrow as required under state
regulations related to closure and post-closure costs of its
landfills. The Company also issues letters of credit as an alternative
for securing funding for the closure and post-closure costs relating
to its landfills. During 1995, the Company issued letters of credit in
exchange for reducing or eliminating virtually all of its escrow
accounts.
e. Assets Held for Sale (included in Other Assets) -
Assets held for sale at December 31, 1994 represented the Company's
corporate jet. The net book value of the corporate jet approximated
$3,200 as of December 31, 1994. During 1995, the Company sold the
corporate jet for $4,125.
f. Net Income (Loss) Per Share-
Net income (loss) per share is based on the weighted average number of
common shares and common equivalent shares outstanding, as applicable,
using the treasury stock method during the periods. The dilutive
effect between primary and fully-dilutive earning per share is less
than 3% or is anti-dilutive for all periods presented and is therefore
not disclosed in the accompanying statements of operations.
g. Statements of Cash Flows-
For purposes of the statements of cash flows, the Company considers
investments having maturities of three months or less at the time of
purchase to be cash equivalents.
The cash amounts of interest and income taxes paid by the Company in
1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ -------
<S> <C> <C> <C>
Interest, net of amounts capitalized
of $2,012, $1,464 and $2,111:
Continuing operations $ 782 $ 265 $ 250
Discontinued operations -- 1,891 16,184
Income taxes:
Continuing operations 1,222 79 --
Discontinued operations -- 706 2,281
</TABLE>
F-10
<PAGE>
As discussed in Note 3b, during 1995 the Company sold all of its
citrus properties in exchange for 1,000 shares of common stock of the
Company, valued at $13,625. This non-cash activity has been excluded
from the 1995 statement of cash flows.
During 1995, the Company issued 126 shares of common stock upon the
exercise, by their employees, of stock grants (Note 12). This non-cash
activity has been excluded from the 1995 statement of cash flows.
During 1995, 1994 and 1993, the Company acquired certain assets,
primarily property, plant and equipment, by assuming liabilities,
primarily notes and other payables, issuing common stock, and making
cash payments. The non-cash portions of approximately $7,947, $4,440
and $14,788 for the years ended December 31, 1995, 1994 and 1993,
respectively, have been excluded from the statements of cash flows.
The accompanying statements of cash flows exclude the cash flows from
discontinued operations.
h. Landfill Closure Cost-
The Company estimates its future cost requirements for closure and
post-closure monitoring and maintenance for solid waste operating
landfills based on its interpretation of the technical standards of
the U.S. Environmental Protection Agency's Subtitle D regulations and
the proposed air emissions standards under the Clean Air Act as they
are being applied on a state-by-state basis. Closure and post-closure
monitoring and maintenance costs represent the cash expenditures yet
to be incurred when a landfill facility ceases to accept waste and
closes. Accruals for closure and post-closure monitoring and
maintenance requirements consider final capping of the site, site
inspections, groundwater monitoring, leachate management, methane gas
control and recovery, and operation and maintenance costs to be
incurred during the period after the facility closes. The Company
provides accruals for these costs as the remaining permitted airspace
of such facilities is consumed. Engineering reviews of the future cost
requirements for closure and post-closure monitoring and maintenance
for the Company's operating landfills are performed at least annually.
These engineering reviews are the basis upon which the Company's
estimates of these future costs and the related accrual rates are
revised. Though it is not expected to be significant, these estimates
could change over the life of the landfill based upon these
engineering reviews.
i. Income Taxes-
Deferred income taxes are recorded based upon temporary differences
between the financial statement and tax bases of assets and
liabilities and net operating loss carryforwards and tax credits
available for income tax purposes.
2. Discontinued Operations
During the third quarter of 1995, the Company implemented a formal plan to
dispose of all of its non-environmental operations. These discontinued
operations consisted primarily of the following: coal mining, mining
equipment manufacturing and licensing, citrus properties in Belize,
precious and industrial metals mining and incidental limestone properties.
Accordingly, the Company's continuing operations are comprised of
integrated solid waste management, which includes landfill operations and
waste collection and recycling services. The Company initially recorded a
loss on the disposal of the discontinued operations of approximately
$30,500 (net of income tax benefits of approximately $10,000) which
represents the estimated loss on the disposal of the non-environmental
operations and a provision of approximately $2,000 for expected operating
losses through the final disposition of such operations.
F-11
<PAGE>
Upon ultimate disposal of its discontinued operations, the Company
determined its initial estimates did not require adjustment.
As discussed in Note 3, as of December 31, 1995, the Company has sold all of
its subsidiaries included in discontinued operations, hence fully disposing
of all non-environmental operations. The recorded transactions reflect the
disposal of all of the Company's non-environmental segments and,
accordingly, the operating results of these segments have been classified as
discontinued operations for all periods presented in the accompanying
consolidated financial statements. Operating results from the discontinued
operations for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Operating revenues $105,056 $115,099 $359,218
-------- -------- --------
Income (loss) before income taxes 7,606 (14,908) (18,897)
Income tax provision
(benefit) 1,899 (5,380) (4,388)
-------- -------- --------
Income (loss) from discontinued
operations $ 5,707 $(9,528) $(14,509)
-------- -------- --------
</TABLE>
Included in income from discontinued operations for 1995 is approximately
$14,000 of revenue and $13,000 of pre-tax income from the sale of the
Company's mining technology patent rights in Australia, offset by a $5,300
disposal loss accrual recorded for Addwest Minerals.
Included in the loss from discontinued operations in 1994 are the following
pretax items: $6,157 loss on disposal in connection with Pittston Minerals
Group, Inc. (Pittston) (Note 3e), $6,800 loss on Southern Illinois Mining
Company, Inc. (Note 3f) and $3,400 loss on limestone project.
Included in the loss from discontinued operations in 1993 are the following
pretax items: $9,384 loss on sulfur project, $5,800 loss on Southern
Illinois Mining Company, Inc. (Note 3f) and $4,050 loss on litigation
settlements.
Most of the Company's revenues from discontinued operations have been
generated under long-term coal sales contracts with electric utilities or
other coal-related organizations located in the Eastern U.S. Revenues are
recognized on coal sales in accordance with the sales agreement, which is
usually when the coal is shipped to the customer.
The discontinued operations leased various machinery and equipment. Lease
expense for the discontinued operations was $678, $7,183 and $26,422 for
1995, 1994 and 1993, respectively.
The assets and liabilities of the discontinued operations have been
reclassified in the accompanying consolidated balance sheets from the
historical classification in order to separately identify them as net assets
of discontinued operations. These net assets consist primarily of net
working capital, tangible and intangible noncurrent assets and other long-
term liabilities.
3. Sale of Subsidiaries (included in Discontinued Operations)
a. Coal Mining, Mining Equipment Manufacturing and Licensing -
On September 22, 1995, in a related party transaction, the Company
entered into a stock purchase agreement with Addington Enterprises, Inc.
(a company f/k/a Addington Acquisition Company, Inc., owned by Larry
Addington, Robert Addington and Bruce Addington; collectively, the
Addington Brothers) whereby the Company would receive $30,000, subject
to a working capital adjustment, in exchange for all the issued and
outstanding shares of common stock of its
F-12
<PAGE>
subsidiaries, Addington Mining, Inc., Mining Technologies, Inc., Addwest
Mining, Inc. and Addington Coal Holding, Inc. This agreement closed on
November 2, 1995, at which time the proceeds received were used by the
Company to pay down its revolving line of credit. In addition, the Company
retained the right to receive certain contingent payments due under the
Company's technology sale to BHP Australia Coal Pty. Ltd. (Note 4). As of
December 31, 1995, the Company estimates such payments may aggregate $3,000.
Included in the transaction described above and pursuant to an option
agreement dated August 4, 1995, the Company sold to the Addington Brothers
all the issued and outstanding shares of common stock of its subsidiary,
Tennessee Mining, Inc. According to the terms of the option agreement, the
Addington Brothers will pay the Company a royalty based on tons of coal
delivered under a certain coal sales contract, up to a maximum aggregate
royalty of $12,500. The Company had not received any payments from the
Addington Brothers under this agreement as of December 31, 1995. Due to
contingencies, no receivable for this royalty has been recorded.
b. Citrus Properties -
On September 22, 1995, in a related party transaction, the Company entered
into an agreement to sell all of the issued and outstanding shares of common
stock of its subsidiary, Belize River Fruit Co., to Larry and Bruce
Addington in exchange for 1,000 shares of common stock of the Company owned
by Larry and Bruce Addington. This transaction was consummated on November
2, 1995, at which time the Company acquired the 1,000 shares valued at
$13,625 and recorded them, at cost, as treasury stock. The Company retained
no obligations in connection with the sale and has fully divested its
investment in citrus operations.
c. Addwest Minerals, Inc. -
Addwest Minerals, Inc. (Addwest), a wholly-owned subsidiary of the Company,
was organized to mine, extract and market precious and industrial metals. On
November 1, 1995, the Company entered into a letter agreement, which was
later finalized as a Stock Purchase Agreement (the Agreement), that provided
for the sale to an unrelated party of all the capital stock of Addwest. On
December 29, 1995, the Company consummated the Agreement to dispose of
Addwest.
The terms of the Agreement required the Company to contribute additional
capital to Addwest in an amount sufficient to pay substantially all existing
liabilities of Addwest through the date of the Agreement, with the exception
of the remaining balance on the Rothschild gold loan. The proceeds received
from the sale ($3,525) were used to retire the remaining balance on the
Rothschild gold loan and the Company has been fully released from its
obligations under that loan.
In accordance with the Company's plan to dispose of Addwest, during 1995 it
closed all previously existing hedging positions (i.e. forward sales
contracts and option collars related to gold bullion). A small gain was
realized upon closing these positions and has been reflected within the
discontinued operations' disposal loss.
d. New River Lime -
On November 17, 1995, the Company sold all of the real property, as well as
all buildings, structures and improvements of its wholly owned subsidiary,
New River Lime, Inc. (NRL), to an unrelated party for $2,500 in cash. The
Company retained no obligations in connection with the sale and has fully
divested its investment in NRL.
F-13
<PAGE>
e. Pittston Disposal -
During September 1993, the Company entered into an agreement to sell the
stock of five of its coal subsidiaries to Pittston. This transaction was
consummated on January 14, 1994 and a loss on disposal was recorded during
1994 of $6,157. In connection with the sale, the Company provided certain
guarantees to Pittston (Note 11g).
f. Southern Illinois Mining Company, Inc.-
During April, 1992, the Company sold all of the outstanding stock of one of
its subsidiaries, Southern Illinois Mining Company, Inc. ("SIMC"), to Marion
Mining Corporation ("Marion") for $1,000 in cash and an approximately
$10,400 promissory note (the "SIMC Note"). On February 1, 1993, both Marion
and SIMC filed bankruptcy. On November 5, 1993, the Company filed a
foreclosure action in state court in Illinois to foreclose the security
interest in the real property and personal property of SIMC. SIMC
subsequently filed an adversary proceeding against the Company.
During 1993, the Company established a $5,800 reserve against the SIMC Note.
Such valuation was determined considering the estimated ultimate realizable
value of the assets that would be recovered from bankruptcy. During the
third quarter of 1994, the Company determined that the net value of the
assets to be recovered from bankruptcy would be substantially less than
previously expected. Accordingly, the Company fully reserved for this note
receivable and reserved for certain other costs to be incurred in connection
with bringing the bankruptcy proceeding to a conclusion (total charge of
$6,800).
On November 14, 1994, the U.S. Bankruptcy Court approved a settlement of all
issues between the Company and SIMC. Rights to any property or proceeds to
be received from this settlement were included with the sale of the coal
mining, mining equipment manufacturing and licensing operation as described
in Note 3a.
4. Sale of Australian Mining Technology Patent Rights
During 1995, the Company entered into a mining technology exchange agreement
with BHP Australia Coal Pty Ltd. (BHPAC) whereby the Company sold its
Australian patent right on highwall mining machines and certain other
related technology. In consideration for the sale, the Company received
cash during 1995 of $14,000. The agreement also provides for contingent
payments to the Company (estimated to aggregate $3,000) upon the
satisfaction of certain production requirements related to BHPAC's use of a
highwall mining system incorporating the sold technology.
The Company's subsidiary which developed the sold patent rights and
technology is one of the subsidiaries which have been sold to Addington
Acquisition Company, Inc. (see Note 3a). However, certain rights to
receive contingent payments from BHPAC under the mining technology exchange
agreement have been retained by the Company.
5. Short-term Investments
At December 31, 1994, the Company's short-term investments, which are deemed
to be available-for-sale, consisted of investments in municipal obligations.
The fair value of these instruments approximate their cost of $1,474 as of
December 31, 1994. As the fair value approximates the cost of these
investments, there are no unrealized holding gains or losses associated with
such investments as of December 31, 1994.
F-14
<PAGE>
During 1995, the Company sold these investments at fair value. As the fair
value of such investments approximated their cost (using the specific
identification method), there were no realized gains or losses associated
with the sale of such investments in 1995.
6. Property, Plant and Equipment
Property, plant and equipment are summarized by major classification as
follows:
December 31,
------------------
1995 1994
-------- -------
(in thousands)
Land $ 2,713 $ 2,450
Buildings and improvements 1,121 1,073
Machinery and transportation equipment 18,448 13,383
Furniture, fixtures and office equipment 505 710
Landfill and other development costs 70,867 55,881
Construction in progress 25,760 16,040
-------- -------
$119,414 $89,537
======== =======
Environmental development costs include the costs to develop landfills,
which consist of expenditures for land and related airspace, permitting
costs and preparation costs. Landfill permitting and preparation costs
represent only direct costs related to these activities, including legal,
engineering, construction of landfill improvements, cell development costs
and the direct costs of Company personnel dedicated for these purposes.
Included in property, plant and equipment as of December 31, 1995 and 1994
are approximately $25,760 and $16,040, respectively, related to start-up
development projects for which depreciation and amortization have not yet
commenced. The Company reviews the realization of these projects on a
periodic basis.
7. Accrued Expenses and Other
--------------------------
As of December 31, 1995 and 1994, accrued expenses and other consisted of:
December 31,
---------------
1995 1994
------ ------
(in thousands)
Payroll and employee benefits $ 697 $1,125
Workers' compensation costs 314 477
Deferred revenue 858 939
Property taxes 106 224
Disposal reserves and other 1,529 2,621
------ ------
$3,504 $5,386
====== ======
F-15
<PAGE>
8. Other Non-Current Liabilities
As of December 31, 1995 and 1994, other non-current liabilities consisted
of:
December 31,
---------------
1995 1994
------ ------
(in thousands)
Accrued royalties $ 600 $ 675
Accrued income taxes 3,385 616
Disposal reserves and other 3,466 1,690
------ ------
$7,451 $2,981
====== ======
9. Closure and Post-Closure Costs
The Company, during its normal course of business, is required to expend
funds for environmental protection and remediation. Such expenditures are
not expected to have a materially adverse effect on its financial condition
or results of operations considering its business is based upon compliance
with environmental laws and regulations and its services are priced
accordingly.
As of December 31, 1995, the Company operates several solid waste landfills.
The Company is responsible for closure and post-closure monitoring and
maintenance costs at virtually all of these landfills which are currently
operating or are engaged in expansion efforts. Estimated aggregate closure
and post-closure costs are to be fully accrued for these landfills at the
time that such facilities cease to accept waste and are closed. Considering
existing accruals at the end of 1995, approximately $70 million of
additional accruals are to be provided over the remaining lives of these
facilities. This estimate is calculated with the assistance of independent
engineers and is based on the need for significant future capital costs to
complete expansion efforts over the lives of the landfills. Such additional
accruals to be provided have been estimated based on current costs and
existing regulatory requirements, and assume that the landfills will be
filled to capacity. Due to uncertainties and significant judgments used in
determining this amount, the actual amount to be expended may differ
substantially.
10. Debt
As of December 31, 1995 and 1994 the Company's debt consisted of the
following:
a. Revolving Line of Credit-
During 1995, the Company's environmental subsidiaries amended their line
of credit agreement with a bank. This amended agreement, which is
secured by virtually all of the assets and common stock of the
environmental subsidiaries, provides for maximum borrowings of $50
million and bears interest at either a rate driven by the bank's base
rate plus 0% to .75% or the Eurodollar rate plus 1.75% to 2.75%. As of
December 31, 1995, the Company had no outstanding balance under this
credit agreement. The available balance under the credit agreement is
reduced by approximately $26,474 in letters of credit issued primarily
as security for solid waste revenue bonds and the closure and post-
closure monitoring and maintenance of landfills. Accordingly,
borrowings available under the credit agreement approximated $23,526 as
of December 31, 1995.
As of December 31, 1994, $21,000 was outstanding under the credit
agreement, of which $6,000 was at the bank's base driven rate (9.25%)
and $15,000 was at the Eurodollar rate (9.125%). Since no principal
payments are required under this credit agreement until its
F-16
<PAGE>
expiration in May 1997, the outstanding balance as of December 31, 1994, was
classified as long-term. In January 1996, the expiration was amended to July
31, 1997.
In connection with the credit agreement, which has been guaranteed by ARI,
the Company has agreed to certain restrictive covenants which, among others,
limit the amount of dividends that the Company can pay, limit its ability to
incur additional indebtedness, and require the Company to maintain certain
financial ratios. The Company is in compliance with these covenants as of
December 31, 1995.
b. Revenue Bonds -
In June, 1994, one of the Company's environmental subsidiaries, Broadhurst
Environmental, Inc., together with the Wayne County Solid Waste Management
Authority, issued $7,400 of tax exempt revenue bonds to finance the
construction and development of a landfill in Wayne County, Georgia. These
bonds mature on July 1, 2014 and bear interest at a rate that floats on a
weekly basis, with a maximum interest rate of 12% per annum. The interest
rate as of December 31, 1995 and 1994 was 5.55% and 5.95% per annum,
respectively. The bonds are supported by an irrevocable letter of credit
issued under the Company's credit agreement (see Note 10a). The fee charged
for the letter of credit as of December 31, 1995 is 1.75% per annum.
c. Long-term Debt-
As of December 31, 1995 and 1994, long-term debt consisted of the following:
1995 1994
------------------
(in thousands)
Solid waste revenue bonds, see Note 10b $ 7,400 $ 7,400
Note Payable, revolving line of credit, see Note 10a ---- 21,000
Various capital leases, secured by equipment, bearing
interest ranging from 8.4% to 9.6%, maturing through
2002, see Note 11a 8,389 ----
Note payable, secured by aircraft, bearing interest at
6%, retired in 1995 --- 3,346
Note payable, unsecured, with annual payments of
$180,000, non-interest bearing (imputed at 7%),
maturing June 12, 1997 338 472
Various other notes payable, bearing interest ranging
from 7.5% to 21% 103 1,429
------------------
$16,230 $33,647
Less-current portion 1,823 880
------------------
$14,407 $32,767
==================
F-17
<PAGE>
Principal payments required for long-term debt after December 31, 1995 are as
follows:
YEAR AMOUNT
---------- -------------
(in thousands)
1996 $ 192
1997 185
1998 18
1999 19
2000 21
Thereafter 7,406
------
Total $7,841
======
11. Commitments and Contingencies -
a. Leases-
The Company has various operating and capital leases for transportation and
other equipment. Lease expense for continuing operations for the years
ending December 31, 1995, 1994 and 1993 was approximately $ 2,552, $1,738
and $1,078 respectively. Property under capital leases, included with
property, plant and equipment in the accompanying consolidated balance sheet
at December 31, 1995 was $6,174, less accumulated depreciation of $667.
Depreciation of assets under capital leases is included in depreciation
expense.
Approximate noncancelable future minimum payments are as follows:
YEAR OPERATING CAPITAL
---------- --------------------
(in thousands)
1996 $1,834 $ 2,350
1997 1,629 2,350
1998 979 2,181
1999 564 1,675
2000 213 889
Thereafter ---- 1,124
------ -------
Total minimum lease payments $5,219 $10,569
======
Less - amount representing interest 2,180
-------
Present value of minimum lease payments (Note 10c) 8,389
Less - current portion 1,631
-------
$ 6,758
=======
b. Legal Matters-
The Company is named as defendant in various actions in the ordinary course
of its business. These actions generally involve disputes related to
contract performance, personal injuries, as well as other civil actions that
could result in additional litigation or other adversary proceedings.
While the final resolution of any matter may have an impact on the Company's
consolidated financial results for a particular reporting period, management
believes that the ultimate disposition of these matters will not have a
materially adverse effect upon the consolidated financial position of the
Company.
F-18
<PAGE>
c. Environmental Service Contracts-
The Company has commitments (primarily with municipalities) to operate
landfills and provide waste hauling services under various contracts
for terms of up to 40 years. Revenues for such contracts are generally
at stated rates but may be adjusted periodically for inflation.
d. Environmental Proceedings-
The Company is involved in various environmental matters and
proceedings, including permit application proceedings, in connection
with the establishment, operation and expansion activities of certain
landfill facilities, as well as other matters or claims that could
result in additional environmental proceedings.
While the final resolution of any matter may have an impact on the
Company's consolidated financial results for a particular reporting
period, management believes that the ultimate disposition of these
matters will not have a material adverse effect upon the consolidated
financial position of the Company.
e. Environmental Insurance-
In order to meet existing government requirements, the Company has
obtained environmental impairment liability insurance coverage for
certain environmental risks arising from the operation of their
landfill facilities. However, if an environmental impairment was of a
magnitude that exceeded the Company's coverage, it could have a
material adverse effect on the Company's business or its financial
condition and results of operations.
f. Employment Contracts-
The Company has employment contracts with certain members of
management which include termination benefits based on the occurrence
of certain events.
g. Sale of Certain Subsidiaries-
During January 1994, the Company sold the stock of five of its coal
subsidiaries to Pittston. In connection with the sale, the Company
provided certain guarantees of indemnification to Pittston. In
connection with the sale of coal subsidiaries to the Addington
Brothers (see Note 3a), the Company received indemnification related
to its guarantees to Pittston as well as other matters, including its
guaranty of certain mineral lease royalty obligations and workers'
compensation benefits.
In connection with the sale of Addwest (Note 3c), the Company agreed
to remain liable for the performance of an Addwest obligation for
$175. Certain royalty rights are being held in escrow until the buyers
pay the Addwest obligation.
12. Stock Option and Stock Grant Plans
The Company has a non-qualified stock option plan pursuant to which 1,500
shares of common stock were reserved for issuance and may be granted to
officers, directors, and key employees of the Company and to key
independent contractors of the Company in amounts and upon terms and
conditions to be determined from time to time by the Compensation Committee
of the Board of Directors. Stock options generally are exercisable either
three years or five years from the date of issuance. The following stock
options have been issued, exercised or canceled as of December 31:
F-19
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 685 490 924
Issued 220 282 ----
Canceled (369) (58) ----
Exercised (75) (29) (434)
---------------------------------------------
Outstanding at end of year 461 685 490
=============================================
Exercisable at end of year 187 101 278
Available for future grants at end of year 482 276 500
Price range per share:
Issued $ 9.50 $ 9.75 $ ----
Canceled 7.50 - 14.75 7.50 - 9.63 ----
Exercised 7.50 - 9.75 9.75 - 14.75 9.75 - 14.75
Outstanding at end of year 7.50 - 14.75 7.50 - 14.75 7.50 - 14.75
</TABLE>
In connection with the sale of subsidiaries discussed in Note 3, the Company
terminated all non-vested stock options previously granted under its stock
option plan to individuals who ceased being employees of the Company as a
result of the transactions.
In 1994, options for a total of 59 shares of the Company's common stock
previously granted to eleven employees were terminated. The Company compensated
each of these employees in the amount of the number of options held by each
employee multiplied by the difference between the per share option exercise
price and $16. The total cost for such terminations was approximately $416.
The Company also has a non-qualified stock grant plan pursuant to which 500
shares of common stock were reserved for issuance to employees of the Company,
except that officers, directors and owners of more than 10% of the Company's
common stock are not eligible to receive stock grants. All stock grants issued
to date specify that the recipient of the stock grant must remain employed by
the Company for 5 years from the date of grant in order to exercise the grant.
As of December 31, the following stock grants were issued or canceled:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year 161 174 193
Issued --- --- ---
Canceled --- (13) (19)
Exercised (126) --- ---
---- --- ----
Outstanding at end of year 35 161 174
==== === ====
Available for issue at year end 339 339 326
==== === ====
</TABLE>
In connection with the transaction discussed in Note 3e, the Company has amended
the stock grant plan to provide, among other things, that service by an employee
with Pittston or an affiliate as a result of the transaction will be counted
toward the time of service required under the stock grants. Employees holding
stock grants for a total of 92 shares of common stock became employees of
Pittston as a result of the transaction. The Company has included the
compensation related to this matter in its measurement of the loss on the
Pittston transaction (see Note 3e).
F-20
<PAGE>
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123), issued in October 1995 and effective for
fiscal years beginning after December 15, 1995, encourages, but does not
require, a fair value based method of accounting for employee stock options
or similar equity instruments. It also allows an entity to elect to
continue to measure compensation cost under Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" (APB No. 25), but
requires proforma disclosures of net income and earning per share as if the
fair value based method of accounting had been applied. The Company expects
to adopt SFAS 123 in 1996. While the Company is still evaluating SFAS 123,
it currently expects it will continue to measure compensation cost under APB
No. 25 and comply with the pro forma disclosure requirements.
13. Income Taxes
The Company follows the accounting for income taxes under SFAS No. 109--
"Accounting for Income Taxes". A requirement of SFAS No. 109 is that
deferred income tax liabilities or assets at the end of each period will be
determined using the tax rate expected to be in effect when taxes are
actually paid or recovered. Accordingly, income tax provisions will
increase or decrease in the same period in which a change in tax rates is
enacted.
<TABLE>
<CAPTION>
The income tax provision (benefit) for the years ended December 31, 1995,
1994, and 1993 consists of the following:
Years Ended December 31,
--------------------------------
1995 1994 1993
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $(1,901) $ 1,926 $ (285)
State 393 683 34
------- ------- -------
(1,508) 2,609 (251)
------- ------- -------
Deferred:
Federal 5,745 (850) (506)
State 189 (163) (272)
------- ------- -------
5,934 (1,013) (778)
------- ------- -------
$ 4,426 $ 1,596 $(1,029)
======= ======= =======
</TABLE>
The following is a reconciliation (in thousands) of the income tax provision
(benefit) at the statutory tax rate of 34% to the Company's effective rate for
the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------
1995 1994 1993
---------------- ----------------- -------------------
Amount Percent Amount Percent Amount Percent
------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal taxes at statutory rate $3,910 34.0% $1,357 34.0% $ (921) (34.0)%
Other, net 132 1.1 (104) (2.6) 49 1.8
State taxes, net of Federal tax benefit 384 3.4 343 8.6 (157) (5.8)
------ ----- ------- ----- -------- --------
$4,426 38.5% $1,596 40.0% $(1,029) (38.0)%
====== ===== ======= ===== ======== ========
</TABLE>
F-21
<PAGE>
Deferred tax assets and liabilities as of December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credits $ 8,062 $ 7,662
Accrued expenses and reserves 2,807 491
Contingent royalty receivable 4,560 ----
Other ---- 375
------- -------
15,429 8,528
Valuation allowance (4,000) (3,600)
------- -------
Total deferred tax assets 11,429 4,928
------- -------
Deferred tax liabilities:
Property, plant and equipment (5,887) (5,494)
------- -------
Total deferred tax liabilities (5,887) (5,494)
------- -------
Net deferred tax asset
(liability) $ 5,542 $ (566)
======= =======
</TABLE>
The alternative minimum tax credits and their accompanying valuation
allowance (described above) were generated by the Company's discontinued
operations and, accordingly, they have no effect on the income tax
provision (benefit) from continuing operations. In connection with the
disposal transactions described in Note 3, however, the Company retained
this deferred tax asset and it will be available for future use by the
continuing operations.
As of December 31, 1995 and 1994, the Company's alternative minimum tax
credit carryforwards have an unlimited carryforward period. A valuation
allowance is provided when it is more likely than not that some portion of
the deferred tax asset will not be realized. The Company has recorded a
valuation allowance against these credits due to uncertainties in
realization using the "more likely than not" valuation method.
As of December 31, 1995, the Company has Federal alternative minimum tax
net operating loss carryforwards of $4,700, which if not utilized will
expire in 2008.
14. 401(k) Saving Plan
------------------
The Company has a qualifying 401(k) savings plan covering substantially
all employees. Under this plan, the Company matches (up to a maximum of
6% gross wages) 50% of the employee's contributions. The Company's expense
under this plan was approximately $70 and $18 for 1995 and 1994,
respectively.
15. Provision for Asset Write-Downs and Other Charges
-------------------------------------------------
During 1994 and 1993, the Company recorded certain provisions for asset
write-downs and other one-time charges. These charges are reflected in the
Company's 1994 and 1993 consolidated statement of operations as follows:
(a) During 1994, the Company wrote off approximately $670 associated with
certain environmental
F-22
<PAGE>
projects as they were no longer being pursued by the Company.
(b) During 1994, the Company wrote off approximately $1,200 associated
with the Company's investment in a recycling technologies company.
The Company wrote off its entire investment in this company in 1994
(included in other expense) due to the investee experiencing
substantial financial difficulties.
(c) During 1993 the Company wrote off approximately $5,122 of assets
relating to experimental composting and recycling technology.
16. Related Party Transactions
The Company has dealt with certain companies or individuals which are
related parties either by having stockholders/officers in common or because
they are controlled by stockholders/officers or by relatives of
stockholders/officers of the Company. The Company recorded various expenses
(included in discontinued operations) to related parties consisting of
approximately $3,809, $7,517 and $19,296 for trucking services, office
rent, flight fees and royalties for the years ended December 31, 1995, 1994
and 1993, respectively.
The Company had amounts receivable from related parties of $5 as of
December 31, 1995 and amounts payable to related parties of $134 as of
December 31, 1994. (See Note 3 for additional related-party transactions).
17. Acquisitions
a. Mid State Environmental, Inc.-
During 1994, one of the Company's subsidiaries, Mid State
Environmental, Inc., acquired a landfill near Macon, Georgia. The
purchase price included 149 shares of Addington Resources, Inc.
stock, cash of approximately $1,453, future royalties based on
revenue generated from the landfill operations and a contingent
payment of approximately $3,600 upon receipt of a permit allowing the
landfill to accept municipal and solid waste. This acquisition was
accounted for as a purchase.
The landfill, at the date of acquisition, was permitted to accept
construction and demolition waste and certain industrial waste. In
October, 1995, a permit allowing the landfill to accept municipal and
solid waste became final and nonappealable. Accordingly, the Company
made the $3,600 payment due to the seller.
During 1995, the seller requested that the Company register the 149
shares for resale. The sales agreement provided that under certain
conditions the Company is obligated to the seller for the difference,
if any, between the per share market price on the date of receipt of
the seller's request for registration (approximately $13.75 per
share) and the per share market price on the date immediately
preceding the effective date of the registration statement for
resale. The Company has not yet filed the requested registration
statement.
b. Dozit Company, Inc.-
During 1994, one of the Company's subsidiaries, Addington
Environmental, Inc., acquired all of the outstanding stock of Dozit
Company, Inc. for approximately $330, as well as future royalty
payments based primarily on tons of waste received at the landfill.
This acquisition was accounted for as a purchase.
F-23
<PAGE>
The landfill is located in Union County, Kentucky. The acquisition
included a newly issued contained landfill construction permit. The
new facility is located adjacent to the existing landfill, was built
to current federal and state landfill standards, and opened in
November, 1994.
18. Fair Value of Financial Instruments
The following disclosures of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments". The Company has
used the following methods and assumptions to estimate the fair value of
each class of financial instrument:
a. Cash and Cash Equivalents-
The fair value approximates the carrying amount due to the short
maturity (three months or less) of the instruments.
b. Short-term Investments-
The fair value is based on quoted market prices for the same or
similar financial instruments.
c. Restricted Cash-
The estimated fair value of financial instruments that reprice or
mature in less than three months approximates the carrying amount due
to the short maturities of the instruments. The fair value of
financial instruments with maturities greater than three months are
estimated based on quoted market prices for the same or similar
financial instruments.
d. Long-term Debt-
The fair value of the Company's debt maturing within one year
approximates the carrying amount due to the short-term maturities
involved.
The fair value of the solid waste revenue bonds approximates the
carrying amount, as the interest rates on the bonds are reset weekly
based on the rate of interest that competitive securities would bear
having similar credit and maturity characteristics.
The fair value of the other debt is estimated by discounting future
cash flows using an interest rate considered market for borrowings of
similar credit quality and maturity.
The carrying and estimated fair values of the Company's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------------------------------------------
1995 1994
------------------------ --------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3,387 $ 3,387 $ 2,719 $ 2,719
Short-term investments ---- ---- 1,474 1,474
Restricted cash 40 40 4,348 4,348
Long-term debt (including current
portion) (16,230) (16,230) (33,647) (33,647)
</TABLE>
The fair value estimates are made at discrete points in time based
on relevant market information and information about the financial
instruments. These estimates may be subjective
F-24
<PAGE>
in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision.
In the normal course of business, the Company has letters of credit,
performance bonds and other guarantees which are not reflected in the
accompanying consolidated balance sheets. In the past, no significant
claims have been made against these financial instruments. Management
believes that the likelihood of performance under these financial
instruments is minimal and expects no material losses to occur in
connection with these financial instruments.
19. Quarterly Financial Data (unaudited - in thousands of dollars except
per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter Year
------ --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Net revenues $10,748 $14,253 $ 16,578 $15,160 $ 56,739
------- ------- -------- ------- --------
Income from operations 1,511 3,195 3,309 4,013 12,028
Net income from continuing operations 1,077 1,926 1,899 2,172 7,074
Income from discontinued operations 863 3,066 1,778 ---- 5,707
Loss on disposal of segment ---- ---- (30,537) (3) ---- (30,537) (3)
------- ------- -------- ------- --------
Net income (loss) $ 1,940 $ 4,992 $(26,860) $ 2,172 $(17,756)
======= ======= ======== ======= ========
Earnings per share (1):
Income (loss) from continuing operations $ 0.07 $ 0.12 $ 0.12 $ 0.14 $ 0.45
Income (loss) from discontinued operations 0.05 0.19 0.11 ---- 0.36
Loss on disposal ---- ---- (1.91) ---- (1.94)
------- ------- -------- ------- --------
Net income (loss) $ 0.12 $ 0.31 $ (1.68) $ 0.14 $ (1.13)
======= ======= ======== ======= ========
1994
------
Net revenues $ 6,851 $ 8,867 $ 9,942 $10,397 $ 36,057
------- ------- -------- ------- --------
Income from operations 1,094 1,121 674 1,581 4,470
Net income (loss) from continuing operations 525 1,022 (244) (2) 1,091 2,394 (2)
Income (loss) from discontinued operations 2,344 521 (11,575) (818) (9,528)
------- ------- -------- ------- --------
Net income (loss) $ 2,869 $ 1,543 $(11,819) $ 273 $ (7,134)
======= ======= ======== ======= ========
Earnings per share (1):
Income (loss) from continuing operations $ 0.03 $ 0.07 $ (0.02) $ 0.07 $ 0.15
Income (loss) from discontinuing operations 0.15 0.03 (0.73) (0.05) (0.60)
------- ------- -------- ------- --------
Net income (loss) $ 0.18 $ 0.10 $ (0.75) $ 0.02 $ (0.45)
======= ======= ======== ======= ========
</TABLE>
(1) Quarters may not add to annual net income (loss) per share due to
changes in shares outstanding
(2) Includes the asset write-downs and other charges described in Note 15
(3) Represents sale of discontinued operations as described in Note 2
F-25
<PAGE>
Exhibit 11
ADDINGTON RESOURCES, INC.
CALCULATIONS OF NET INCOME (LOSS) PER SHARE
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Primary net loss $(17,756) $(7,134) $(16,189)
======== ======= ========
Average shares of stock outstanding 15,748 15,798 15,563
======== ======= ========
Primary net loss per share $ (1.13) $ (0.45) $ (1.04)
======== ======= ========
</TABLE>
NOTE: The dilutive effect of the Company's common stock
equivalents (grants and shares under option) for the primary
net income per share calculation was insignificant for
1995, 1994 and 1993.
F-26
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
ADDINGTON RESOURCES, INC.
Date: March 28, 1996 By /s/ Jack T. Baker
-------------------------------
Jack T. Baker, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated
Signature Title Date
- --------- ----- ----
/s/ Jack T. Baker President (Principal March 28, 1996
- ----------------------- Executive Officer)
Jack T. Baker
/s/ R. Douglas Striebel Vice President and Chief March 28, 1996
- ----------------------- Financial Officer
R. Douglas Striebel (Principal Financial
Officer) (Principal
Accounting Officer)
/s/ Larry Addington Director March 28, 1996
- -----------------------
Larry Addington
/s/ Stephen Addington Director March 28, 1996
- -----------------------
Stephen Addington
/s/ Howard P. Berkowitz Chairman of the Board March 28, 1996
- -----------------------
Howard P. Berkowitz
/s/ Harold Blumenstein Director March 28, 1996
- -----------------------
Harold Blumenstein
<PAGE>
/s/ Jack C. Fisher Director March 28, 1996
- -----------------------
Jack C. Fisher
/s/ James Grosfeld Director March 28, 1996
- -----------------------
James Grosfeld
/s/ Richard Ravitch Director March 28, 1996
- -----------------------
Richard Ravitch
<PAGE>
BY-LAWS OF
ADDINGTON RESOURCES, INC.
ARTICLE I
OFFICES
The registered office of the corporation in the State of
Delaware shall be located at The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware. The principal office of the
Corporation is 1500 North Big Run Road, Ashland, Kentucky 41102.
The corporation may have such other offices, either within or
without the State of Delaware, as the business of the corporation
may require from time to time.
ARTICLE II
STOCKHOLDERS MEETINGS AND RECORD DATES
SECTION 1. ANNUAL MEETING. Except as may otherwise be
designated by the Board of Directors, the annual meeting of
stockholders of the Corporation will be held on the second
Tuesday of July of each year at 10:00 a.m. for the purpose of
electing directors and for the transaction of such other
business as may come before the meeting. If the date set for
the annual meeting is a legal holiday, the annual meeting will
be held on the first day following the second Tuesday in
July which is a business day. If the election of directors
shall not be held on the day designated for any annual meeting,
or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the
stockholders to be held as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stock-
holders may be called by the president, by a majority of the
members of the Board of Directors or by the holders of not less
than one-fifth of all the shares entitled to vote at the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may
designate any place within or without the State of Delaware as the
place of meeting for any annual meeting or for any special meeting
called by the Board of Directors.
If no designation is made, or if a special meeting be called
by other than the Board of Directors, the place of meeting shall
be the principal office of the corporation, except as otherwise
provided in Section 5 of this article.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the
place, day and hour of the meeting and, in case of a special meet-
ing, the purpose or purposes for which the meeting is called, shall
be delivered not less than ten nor more than sixty days before the
date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officer or
persons calling the meeting, to each stockholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail in a sealed
envelope addressed to the stockholder at his address as it appears
on the records of the corporation, with first class postage thereon
prepaid.
SECTION 5. MEETING OF ALL STOCKHOLDERS. If all of the stock-
holders shall meet at any time and place, either within or without
the State of Delaware, and consent to the holding of a meeting,
such meeting shall be valid without call or notice, and at such
meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. If the stock transfer books are not closed or no record date
is fixed for the determination of stockholders entitled to notice
of or the vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the close of business on
the day next preceding the first date on which notice of the
meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of stock-
holders. When a determination of stockholders entitled to vote at
any meeting of stockholders has been made as provided herein, such
determination shall apply to any adjournment thereof; provided,
however, that the Board of Directors may fix a new record date for
the adjourned meeting.
SECTION 7. VOTING LISTS AND SHARE LEDGER. The secretary
shall prepare a complete list of the stockholders entitled to vote
at any meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares
held by each stockholder, which list, for a period of ten days
prior to any meeting, shall be kept on file at a place within the
city where the meeting is to be held, which place shall be spe-
cified in the notice of the meeting, or at the place where the
meeting is to be held, and shall be subject to inspection by any
stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the meeting and shall be
subject to the inspection of any stockholder during the meeting.
The original share ledger or stock transfer book, shall be the only
evidence as to the stockholders entitled to examine such list or
share ledger or stock transfer book, or the stockholders entitled
to vote at any meeting of stockholders or to receive any dividend.
SECTION 8. QUORUM. A majority of the outstanding shares
entitled to vote, represented in person or by proxy, shall con-
stitute a quorum at any meeting of stockholders. The stockholders
present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 9. PROXIES. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stock-
holder or by his duly authorized attorney-in-fact. Such proxy
shall be filed with the secretary of the corporation before or at
the time of the meeting.
SECTION 10. INFORMAL ACTION BY STOCKHOLDERS. Any action
required or permitted to be taken at any annual or special meeting
of stockholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed by a Board of Directors.
SECTION 2. NUMBER AND TENURE. The number of directors of the
Corporation shall not be less than three nor more than nine, the
exact number from time to time to be fixed by the Board of
Directors. Each director shall hold office for the term for which
he is elected or until his successor shall have been elected and
qualifies for the office, whichever period is longer.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board
of Directors shall be held without other notice than this bylaw,
immediately after, and at the same place as, the annual meeting of
stockholders. The Board of Directors may provide, by resolution,
the time and place, either within or without the State of Delaware,
for the holding of additional regular meetings without other notice
than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board
of Directors may be called by or at the request of the president or
any two directors. The person or persons authorized to call
special meetings of the Board of Directors may fix any place,
either within or without the State of Delaware, as the place for
holding any special meeting of the Board of Directors called by
them.
SECTION 5. NOTICE. Notice of any special meeting shall be
given at least three (3) days prior thereto by written notice
delivered personally, mailed or telegrammed to each director at his
or her business address. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail in a sealed
envelope so addressed, with first class postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company.
Any director may waive notice of any meeting. The attendance of a
director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the Board of Directors
shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, provided that if less than a
majority of the directors are present at said meeting, a majority
of the directors present may adjourn the meeting from time to time
without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors.
SECTION 8. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of
the remaining directors though less than a quorum of the Board of
Directors. A director elected to fill a vacancy shall serve for
the unexpired term of his predecessor in office.
SECTION 9. COMMITTEES. The Board of Directors may, by reso-
lution passed by a majority of the whole board, designate one or
more committees, each committee to consist of one or more direc-
tors of the Corporation. The Board of Directors may designate one
or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the
committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors, shall have and may exer-
cise all of the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation in
accordance with and subject to the General Corporation Law of the
State of Delaware.
SECTION 10. INFORMAL ACTION. Any action required or per-
mitted to be taken at a meeting of the Board of Directors, or any
action which may be taken at a meeting of the Board of Directors or
of a committee, may be taken without a meeting if a consent, in
writing, setting forth the action so taken shall be signed by all
of the directors, or all of the members of the committee, as the
case may be. Such consent shall have the same effect as a
unanimous vote.
ARTICLE IV
OFFICERS
SECTION 1. CLASSES. The officers of the corporation may
include a chief executive officer, a president, one or more
vice presidents, a treasurer, a secretary, and such other
officers, as may be provided by the Board of Directors
and elected in accordance with the provisions of this article.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the Board of Directors at
the first meeting of the Board of Directors held after each annual
meeting of stockholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon
thereafter as convenient. Vacancies may be filled or new offices
created and filled at any meeting of the Board of Directors. Each
officer shall hold office until his or her successor shall have
been duly elected and shall have qualified or until his or her
death or until he or she shall resign or shall have been removed
from office in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer elected by the Board of
Directors may be removed by the Board of Directors whenever in its
judgment the best interest of the corporation would be served
thereby, but such removal shall be without prejudice to the con-
tract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create
contractual rights.
SECTION 4. CHIEF EXECUTIVE OFFICER. The chief executive
officer shall have general charge and authority over the business
of the Corporation and perform such executive, supervisory, and
management functions and duties as the Board of Directors may from
time-to-time assign.
SECTION 5. PRESIDENT. In the absence of the chief
executive officer or in the event of his inability or refusal to
act, the president shall perform the duties of the chief executive
officer and, when so acting, shall have all the powers of and be
subject to all the restrictions upon the chief executive officer.
The president shall perform such other duties as from time-to-time
may be assigned by the chief executive officer or by the Board of
Directors.
SECTION 6. VICE PRESIDENT. In the absence of the president
or in the event of his inability or refusal to act, a vice presi-
dent shall perform the duties of the president and, when so acting,
shall have all the powers of and be subject to all the restrictions
upon the president. A vice president shall perform such other
duties as from time to time may be assigned by the president or by
the Board of Directors.
SECTION 7. TREASURER. The treasurer shall [a] have charge
and custody of and be responsible for all funds and securities of
the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit
all such moneys in the name of the corporation in such banks, trust
companies or other depositories as shall be selected in accordance
with the provisions of these bylaws; and, [b] in general, perform
all the duties normally incident to the office of treasurer and
such other duties as from time to time may be normally assigned by
the president or the Board of Directors.
SECTION 8. SECRETARY. The secretary shall [a] keep the
minutes of the stockholders' and of the Board of Directors' meet-
ings in one or more books provided for that purpose; [b] see that
all notices are duly given in accordance with the provisions of
these bylaws or as required by law; [c] be custodian of the cor-
porate records and stock transfer books of the corporation; and,
[d] in general, perform all duties normally incident to the office
of secretary and such other duties as from time to time may be
assigned by the president or by the Board of Directors.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS AND AGREEMENTS. The Board of Directors
may authorize any officer or officers, agent or agents, to enter
into any contract or agreement or execute and deliver any
instruments in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of
the corporation, and no evidences of indebtedness shall be issued
in its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS, DRAFTS, ORDERS, ETC. All checks, drafts,
or other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents, of the
corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not other-
wise employed shall be deposited from time to time to the credit of
the corporation in such banks, trust companies, or other
depositories as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates repre-
senting shares of the corporation shall be in such form as may be
determined by the Board of Directors. Such certificates shall be
signed by the chairman or vice chairman of the Board of Directors,
or the president or vice president, and by the secretary or
an assistant secretary and may be sealed with the seal of the cor-
poration or a facsimile thereof. All certificates surrendered to
the corporation for transfer shall be cancelled, and no new
certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate, a new
one may be issued therefor upon such terms and indemnity to the
corporation as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the
corporation shall be made only on the books of the corporation by
the registered holder thereof or by his attorney authorized by
power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate
for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day
of January and end on the 31st day of December of each calendar
year.
ARTICLE VIII
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of these bylaws, or under the provisions of the Cer-
tificate of Incorporation, or under the provisions of the cor-
poration laws of the State of Delaware, waiver thereof in writing,
signed by the person, or persons, entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent
to the giving of such notice.
ARTICLE IX
AMENDMENT OF BYLAWS
The Board of Directors may alter, amend or rescind these
bylaws, subject to the rights of the stockholders to repeal or
modify such actions.
ARTICLE X
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, admini-
strative, investigative or otherwise (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director, officer or
employee of the corporation or is or was serving at the request of
the corporation as director, officer or employee of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any
other capacity as a director, officer or employee, shall be indem-
nified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment),
against all expense, liability and loss (including penalties,
fines, judgments, attorneys' fees, amounts paid or to be paid in
settlement and excise taxes or penalties imposed on fiduciaries
with respect to [i] employee benefit plans, [ii] charitable
organizations or [iii] similar matters) reasonably incurred or suf-
fered by such person in connection therewith and such indemni-
fication shall continue as to a person who has ceased to be a
director, officer or employee and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that
the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person (other than pursuant to Section 2 of this
ARTICLE) only if such proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to
indemnification conferred in this Section 1 shall be a contract
right and shall include the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service
was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan)
in advance of the final disposition of a proceeding shall be made
only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this ARTICLE or
otherwise.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim which
the corporation is obligated to pay under this ARTICLE is not paid
in full by the corporation within 60 days after a written claim has
been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has
been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such
defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to
the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the
corporation (including its Board of Directors, independent legal
counsel or stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 3. MISCELLANEOUS. The provisions of this ARTICLE
shall cover claims, actions, suits and proceedings, civil or cri-
minal, whether now pending or hereafter commenced, and shall be
retroactive to cover acts or omissions or alleged acts or omissions
which heretofore have taken place. If any part of this ARTICLE
should be found to be invalid or ineffective in any proceeding, the
validity and effect of the remaining provisions shall not be
affected.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The right to indem-
nification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in this
ARTICLE shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stock-
holders or disinterested directors or otherwise.
SECTION 5. INSURANCE. The corporation may maintain insur-
ance, at its expense, to protect itself and any director, officer,
employee or agent of the corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF AGENTS. The corporation may,
to the extent authorized from time to time by the Board of Direc-
tors, grant rights to indemnification, and rights to be paid by the
corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any agent of the corporation
to the fullest extent of the provisions of this ARTICLE with
respect to the indemnification and advancement of expenses of
directors, officers and employees of the corporation.
<PAGE>
EXHIBIT 10(A)
EMPLOYMENT AGREEMENT
Amended and Restated Employment Agreement dated as of the 17th day of
October, 1995, between Addington Environmental, Inc., 771 Corporate Drive, Suite
1000, Lexington, Kentucky 40503, a Kentucky corporation (the "Company") and Jack
T. Baker, 3414 Gingertree Circle, Lexington, Kentucky 40502, (the "Executive").
Recitals
--------
A. The Company and the Executive are parties to an Employment Agreement,
dated as of October 4, 1994 (the "Existing Agreement").
B. The Company and the Executive wish to amend and restate the Existing
Agreement, which in amended and restated form shall supersede the Existing
Agreement in its entirety.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties to this Agreement,
the parties agree as follows:
1. Employment Services. The Company hereby employs the Executive and the
Executive hereby accepts such employment.
2. Duties. During the Term, the Executive shall be the Company's
Executive Vice President and General Counsel. In those offices, the Executive
shall perform the duties customary for those positions and such additional
duties, not inconsistent with the Executive's status as a senior executive of
the Company, as the Board may from time to time assign to him. The Executive
agrees to accept election, and serve during all or any part of the Term, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company, without any compensation therefor other than that
specified in this Agreement.
3. Extent of Services; Business Opportunities.
(a) The Executive shall serve the Company faithfully and to the best of his
ability and shall devote his full and exclusive time, attention and energies to
the business of the Company.
(b) All waste management opportunities (including development and
acquisition opportunities) developed or located by the Executive during the
<PAGE>
Term or which the Executive becomes aware of during the Term shall belong to the
Company.
4. Term. The term of the Executive's employment pursuant to this
Agreement and the obligations of the Company with respect to such employment
(the "Term") shall be a three-year period which shall commence on October 1,
1994, and will end on October 1, 1997, or on such other date on which the Term
shall terminate pursuant to Section 10 or be extended pursuant to Section 11.
5. Base Salary. The Company shall pay the Executive a base salary of
$175,000 per annum, payable in 26 equal biweekly installments; provided that for
so long as the Executive serves as chief executive officer of the Company his
base salary shall be not less than $200,000 per annum. Salary increases, if
any, will be at the sole discretion of the Board. On each anniversary of this
Agreement, the Board will review the performance of the Executive and the
Company's overall performance and decide in its sole discretion whether to
increase the Executive's base salary.
6. Bonuses. The Executive shall receive any bonus or bonuses which the
Board of Directors in its sole discretion may award for services performed
during the Term.
7. Expenses. In accordance with the Company's expenses reimbursement
policies and procedures in effect from time to time, the Executive shall be
reimbursed within 30 days for reasonable out-of-pocket expenses incurred while
performing his services, as long as the Executive provides satisfactory written
documentation of such expenses.
8. Vacation. The Executive shall be entitled to three weeks of vacation
per year, to be taken at a time mutually satisfactory to the Executive and the
Company, during which time his salary shall be paid in full. Unused vacation
for any year during the Term may not be accumulated for use in subsequent years
unless the failure to use such vacation was at the direction of the Company's
Board.
9. Fringe Benefits. During the Term, the Executive shall be entitled to
all benefits for which the Executive shall be eligible under any qualified
pension plan, 401(K) plan, group insurance or other so-called fringe benefits
which the Company makes available to its senior executives generally. The
Company shall provide the Executive, at the Company's expense, with an
automobile comparable to the automobile provided to the Executive as of the date
of this Agreement.
10. Termination.
10.1 The Executive's employment pursuant to this Agreement and the Term
shall be terminated upon the occurrence of the earliest of the following events:
<PAGE>
(a) the death or Disability of the Executive;
(b) the Company's delivery of written notice of termination to the
Executive (which notice shall specify whether such termination is for Cause or
without Cause);
(c) the expiration of the Term; and
(d) the Executive's delivery of written notice of termination in accordance
with Section 10.4.
10.2 If the Executive shall die during the Term, or if the Term shall
terminate due to the Executive's Disability, the Executive (or his estate or
personal representatives) shall be entitled to receive the Executive's accrued
salary to the date of termination plus such benefits as are then payable under
the Company's benefit programs. "Disability" means the Executive's inability,
due to illness, accident, injury, physical or mental incapacity or other
disability, to carry out effectively his duties and obligations to the Company
hereunder or to participate effectively and actively in the management of the
Company for a period anticipated to last at least 6 months, as determined in the
good faith judgment of the Board.
10.3 The Company may terminate the Executive's employment hereunder for
Cause. Upon such termination, this Agreement shall terminate and the Executive
shall be entitled to receive no further amounts or benefits hereunder, except
any as shall have been earned or otherwise vested prior to the date of such
termination. "Cause" shall mean (i) the commission of a felony or a crime
involving moral turpitude or the commission of any other act involving
dishonesty, disloyalty or fraud with respect to the Company, (ii) conduct
tending to bring the Company into substantial public disgrace or disrepute,
(iii) substantial and repeated failure to perform duties as reasonably directed
by the Board, (iv) gross negligence or willful misconduct with respect to the
Company or any of its subsidiaries or affiliates, or (v) any other material
breach of any agreement between the Executive and the Company or its
subsidiaries and affiliates which is not cured within 15 days after written
notice thereof to the Executive. In addition, prior to a "Change of Control"
except during the pendency of a "Potential Change of Control", Cause shall
include failure to satisfactorily perform duties and responsibilities as
reasonably determined by the Board of Directors. The Employee shall not be
deemed to have been terminated for Cause unless and until there has been
delivered to Employee a resolution of the Board of Directors, adopted after the
Executive has had a reasonable opportunity to be heard, stating that in the good
faith opinion of the Board, the Employee engaged in conduct constituting
"Cause", specifying the basis therefor in reasonable detail.
10.4 The Executive may terminate this Agreement for Good Reason upon 30
days' prior written notice to the Company. Upon such termination, or in the
event the Company terminates the Term of this Agreement without Cause, the
Executive shall be
<PAGE>
entitled to receive, in satisfaction of the balance of the Company's
obligations, to the Executive hereunder, all amounts of base salary payable to
the date of termination and continued payment as and when otherwise due of the
base salary for the balance of the Term as would otherwise be in effect for the
balance of the Term (assuming no further extension of the Term). In the event
of any such termination, the Executive shall have no duty to mitigate damages
through other employment or otherwise. "Good Reason" means: assignment to the
Executive of duties inconsistent with those of a senior executive officer (it
being acknowledged and agreed that, without in any way limiting or expanding
upon the foregoing, the assignment to the Executive of duties consistent with
either (x) those of general counsel of the Company or (y) having overall
responsibility for identification and negotiation of greenfield sites and site
management contracts are not inconsistent with those of a senior executive
officer); reduction in base salary (other than any reduction relating to the
Executive's ceasing to serve as chief executive officer of the Company in which
case such base salary shall not be below $175,000); or only after a "Change of
Control" has occurred or during the pendency of a "Potential Change of Control "
requiring the Executive to be based anywhere other than a 50-mile radius of
Lexington, Kentucky, except for reasonable travel as required for Company
business. The Executive's ceasing to serve as chief executive officer of the
Company shall not constitute Good Reason.
11. Extension. On September 30, 1997, and on each September 30
thereafter, the Term shall be deemed to have been automatically extended for an
additional one-year period without the further necessity of any written
documentation, unless either party provides at least one year's prior written
notice to the other party of its desire not to extend the Term.
12. Change of Control. Notwithstanding the provisions of Section 10, if
(a) within 36 months following the occurrence of any Change of Control or the
execution of a definitive agreement by the Company or Addington Resources, Inc.
("ARI"), for a transaction which would result in a Change of Control, or (b)
during the period commencing on the date of a public announcement of a proposal
to effectuate a transaction that would result in a "Change of Control" of the
type specified in clauses (i), (iii) or (iv) of the definition thereof and
ending on the date that such proposal expires or is withdrawn (a "Potential
Change of Control"), either (i) the Company terminates the Executive's
employment without Cause or (ii) the Executive terminates his employment with
the Company for Good Reason within twelve months of the occurrence of the event
or circumstances constituting Good Reason, the Executive shall be entitled to
receive, in lieu and not in addition to any severance provided in Section 10,
all amounts of base salary payable to the date of termination plus an amount
equal to three times the greater of (i) the Executive's base salary in effect
immediately prior to the Change of Control last occurring, and (ii) the
Executive's base salary in effect immediately prior to the date of termination.
"Change of Control" means (i) the acquisition by any person or "group" in a
single transaction or series of related transactions of shares of Common Stock
or other voting securities representing 50% or more of the outstanding voting
power, entitled to vote generally in the election of directors of ARI, after
giving effect to such transaction, (ii)
<PAGE>
during any period of two consecutive years, individuals who at the beginning of
such period constitute a majority of the Board of Directors of ARI cease to
constitute a majority thereof unless the election, or the nomination for
election by the stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of the period, (iii) the sale of all or substantially all of the
assets of ARI (other than to a wholly-owned subsidiary of ARI), or (iv) the sale
of a majority of the capital stock of the Company or substantially all of its
assets. This Section 12 contemplates that there may be multiple Changes of
Control or Potential Changes of Control. The provisions of this Section 12 shall
survive the expiration of this Agreement and shall continue to be binding on the
Company as long as the Executive remains employed by the Company or any of its
affiliates.
13. Restrictive Covenant.
(a) As an essential ingredient in consideration of this Agreement, the
Executive agrees that he shall not, during the Term, and for a period of two
years from the termination or expiration of the Term for any reason whatsoever,
whether the Executive's termination of employment by the Company is voluntary or
involuntary, either directly or indirectly, for or on behalf of himself or any
persons, partnership, corporation or other entity, other than the Company, ARI
and its subsidiaries (the "Addington Group").
(i) Engage in the waste collection, recycling, or disposal business
("Environmental Services") within a 75-mile radius of any of the waste disposal
facilities operated or managed by the Addington Group on the effective date of
such termination or as to which the Addington Group had plans or proposals to
operate or manage on such effective date;
(ii) Solicit of any current or former customers of the Addington Group to
provide Environmental Services;
(iii) Except in the course of his employment hereunder and for the benefit
of the Addington Group, take, use appropriate or divulge to anyone any
Proprietary Information of the Company; or
(iv) Enter into agreement with or solicit the employment of, employees of
the Company for the purpose of causing them to leave the Company or to do any of
the acts described in paragraphs 13(a)(i) through (iii) above.
(b) In connection with the Executive's employment, he will be exposed to
Proprietary Information of the Company and its affiliates. "Proprietary
Information" means any private information concerning the Company and its
affiliates, including, without limitation, the Company's or its affiliates'
design, use, purchase or sale of its landfills and other waste disposal
facilities; information, the Company's or its affiliates; design, use, purchase
or sale of its landfills and other waste disposal facilities; information
<PAGE>
concerning marketing plans or proposals, contracts agreements, customer list
concerning existing and potential waste sources and landfill or waste disposal
development and acquisition opportunities. The Company has expressly or
impliedly protected such information from unrestricted use by persons not
associated with the Company. Information that is generally known to the
Company's competitors without prior disclosure by the Executive shall excluded
from the scope "Proprietary Information" for purpose of this Agreement.
(c) If the Executive commits a breach, or threatens to commit a breach, of
any of the provisions of this Section, the Company shall have the right and
remedy to have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company and all of
such rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.
(d) If any of the covenants contained in this Section, or any part thereof,
hereafter are construed to be invalid or unenforceable, the same shall not
affect the remainder of the covenant or covenants, which shall be given full
effect, without regard to the invalid portions.
(e) If any of the covenants contained in this Section, or any part thereof,
are held to be unenforceable because of the duration of such provision, the
parties agree that the court making such determination shall have the power to
reduce the duration of such provision and, in its reduced form, said provision
shall then be enforceable.
(f) The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in this Section upon the courts of any state within the
geographical scope of such covenants. In the event that the courts of any one
or more of such state shall hold such covenants wholly unenforceable by reason
of the breadth of such covenants or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect the
Company's right to the relief provided above in the courts of any other states
within the geographical scope of such covenants as to breaches of such covenants
in such other respective jurisdictions, the above covenants as they relate to
each state being for this purpose severable into diverse and independent
covenants.
14. Miscellaneous.
(a) This Agreement shall inure to the benefit of and shall be binding upon
the Company, its successors and assigns.
(b) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Kentucky.
<PAGE>
(c) To the extent that any one or more of the provisions of this Agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired.
(d) All notices required to be given under this Agreement shall be in
writing and may be given in person or by United States mail, by delivery service
or by electronic transmission at the address set forth in the preamble or such
other address as either party may provide.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first set forth above, but actually on the dates set
forth below.
ADDINGTON ENVIRONMENTAL, INC.
By: /s/ Howard P. Berkowitz
------------------------
Chairman
Date: 11/9/95
----------------------
/s/ Jack T. Baker
---------------------------
Date: 11/13/95
----------------------
<PAGE>
EXHIBIT 10(B)
ADDINGTON RESOURCES, INC.
1500 NORTH BIG RUN ROAD
ASHLAND, KENTUCKY 41105
As of October 17, 1995
Mr. R. Douglas Striebel
2317 Abbeywood Road
Lexington, Kentucky 40515
Dear Doug:
This letter will confirm our understanding that your employment
agreement, dated May 31, 1988 (the "Initial Agreement"), as amended as of
December 6, 1989 (the "Amendment" and, together with the Initial Agreement, the
"Agreement") is hereby further amended as set forth below:
1. Effective August 4, 1995, your annual salary is increased to
$150,000 per year.
2. For calendar 1995 and subsequent years, you shall receive such
bonus or bonuses which the Board of Directors in its sole discretion may award
for services during such year. The foregoing shall be in lieu of the provisions
of paragraph 1 of the Amendment.
3. In lieu of the provisions of paragraph 6 of the Initial Agreement
the following provisions shall apply:
(i) other than during a "Potential Change of Control", if prior
to the consummation of a "Change of Control" your employment is terminated by
the Company without Cause or you quit for Good Reason, you shall be entitled to
receive all amounts of base salary payable to the date of termination plus an
amount equal to one year's base salary as in effect immediately prior to your
termination.
(ii) If (a) within 36 months following the occurrence of any
Change of Control or the execution of a definitive agreement by Addington
Resources, Inc. for a transaction which would result in a Change of Control, or
(b) during the period commencing on the date of a public announcement of a
proposal to effectuate a transaction that would result in a "Change of Control"
of the type specified in clauses (i), (iii) or (iv) of the
<PAGE>
definition thereof and ending on the date that such proposal expires or is
withdrawn (a "Potential Change of Control"), either (i) the Company terminates
your employment without Cause or (ii) you terminate your employment with the
Company for Good Reason within twelve months of the occurrence of the event or
circumstances constituting Good Reason, you shall be entitled to receive all
amounts of base salary payable to the date of termination plus an amount equal
to three times the greater of (i) your annual salary in effect immediately prior
to the Change of Control last occurring, and (ii) your annual salary in effect
immediately prior to the date of termination. "Change of Control" means (i) the
acquisition by any person or "group" in a single transaction or series of
related transactions of shares of Common Stock or other voting securities
representing 50% or more of the outstanding voting power, entitled to vote
generally in the election of directors of the Company after giving effect to
such transaction, (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute a majority of the Board of
Directors of the Company cease to constitute a majority thereof unless the
election, or the nomination for election by the stockholders, of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period, (iii) the
sale of all or substantially all of the assets of the Company (other than to a
wholly-owned subsidiary of the Company), or (iv) the sale of a majority of the
capital stock of Addington Environmental, Inc. or substantially all of its
assets. This paragraph 3 contemplates that there may be multiple Changes of
Control or Potential Changes of Control.
(iii) "Cause" shall mean (i) the commission of a felony or a crime
involving moral turpitude or the commission of any other act involving
dishonesty, disloyalty or fraud with respect to the Company, (ii) conduct
tending to bring the Company into substantial public disgrace or disrepute,
(iii) substantial and repeated failure to perform duties as reasonably directed
by the Board, (iv) gross negligence or willful misconduct with respect to the
Company or any of its subsidiaries or affiliates, or (v) any other material
breach of any agreement between you and the Company or its subsidiaries and
affiliates which is not cured within 15 days after written notice thereof to
you. In addition, prior to a "Change of Control" except during the pendency of a
"Potential Change of Control", Cause shall include failure to satisfactorily
perform duties and responsibilities as reasonably determined by the Board of
Directors. You shall not be deemed to have been terminated for Cause unless and
until there has been delivered to you a resolution of the Board of Directors,
adopted after you have had a reasonable opportunity to be heard, stating that in
the good faith opinion of the Board, you engaged in conduct constituting
"Cause", specifying the basis therefor in reasonable detail.
(iv) "Good Reason" means: assignment to you of any duties
inconsistent with those of a chief financial officer; reduction in base salary;
or only after a Change of Control has occurred or during the pendency of a
Potential Change of Control requiring you to be based anywhere other than a 50-
mile radius of Lexington, Kentucky, except for reasonable travel as required for
Company business.
<PAGE>
4. All of the terms and provisions of the Agreement shall continue in
full force and effect after the date hereof, except as modified herein.
If the foregoing correctly reflects our understanding as to the
subject matter hereof, please do indicate in the space indicated below,
whereupon the Employment Agreement shall be amended as set forth herein.
ADDINGTON RESOURCES, INC.
By: /s/ Howard P. Berkowitz
------------------------
Chairman of the Board
/s/ R. Douglas Striebel
- -------------------------
R. Douglas Striebel
<PAGE>
ADDINGTON RESOURCES, INC.
Amendment of Employment Agreement
---------------------------------
This is an Amendment of Employment Agreement dated as of December 6,
1989, between Addington Resources, Inc. (the "Corporation"), a Delaware
corporation, and R. Douglas Striebel ("Striebel").
RECITALS
--------
A. The Corporation and Striebel are parties to a letter agreement
dated May 31, 1988 (the "Employment Agreement"), which outlines Striebel's
employment by the Corporation.
B. Pursuant to Section 2 of the Employment Agreement, the Corporation
has agreed to pay Striebel a bonus based upon the performance of the Corporation
and Striebel.
C. The Corporation and Striebel wish to amend the terms and
conditions of the bonus payable pursuant to the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the Corporation and Striebel agree as follows:
1. Management Incentive Program. In lieu of the possible performance
bonus as set forth in Section 2 of the Employment Agreement, the Corporation and
Striebel agree that Striebel shall be eligible to participate in the
Corporation's Management Incentive Program as set forth in Annex A to this
Amendment. The targets, goals, and awards for this program shall be subject to
the guidelines and approval of the Audit Committee, to be set annually and for
the fiscal year ending December 31, 1989, shall be as set forth in Annex A.
2. Employment Agreement. All of the terms and provisions of the
Employment Agreement shall continue in full force and effect after the date
hereof, except as modified herein.
IN WITNESS WHEREOF, the Corporation and Striebel have executed this
Agreement of Employment Agreement as of the date first set forth above, but
actually on the dates set forth below.
<PAGE>
ADDINGTON RESOURCES, INC.
By /s/ Larry Addington
------------------------------
Larry Addington
President and Chief Executive
Officer
Date: 12-14-89
---------------------------
/s/ R. Douglas Striebel
---------------------------------
R. Douglas Striebel
Date: 12-14-89
---------------------------
<PAGE>
ADDINGTON RESOURCES, INC.
P. O. BOX 2189
ASHLAND, KY 41105-2189
May 31, 1988
Mr. Douglas Striebel, C.P.A.
Arthur Andersen & Co.
2300 Meidinger Tower
The Louisville Galleria
Louisville, Kentucky 40202
Re: Employment of Chief Financial Officer
of Addington Resources, Inc.
-------------------------------------
Dear Mr. Striebel:
This letter is to memorialize the employment agreement reached between you
and Addington Resources, Inc. over a series of meetings and telephone
conversations. Please accept this as a firm offer which, if executed by you
appropriately and returned to the company, will become an employment contract
enforceable against both parties.
You will begin working for Addington Resources, Inc. on or before July 1,
1988 under the following terms and conditions:
1. Annual Salary: $100,000.00 per year;
2. Bonuses: (i) From -0- to 50% of your Annual Salary based on the
Company meeting projections as set by the Chairman
of the Board and you meeting specific projections
as set by the Chairman of the Board and you meeting
specific pr ojections as set by your immediate
Supervisor;
<PAGE>
(ii) 50% to 100% based on the Company exceeding
projections set by the Chairman and your exceeding
projections set for you by your immediate
Supervisor;
(iii) You will be granted a bonus of initial Stock
Options for 20,000 shares of Addington Resources,
Inc. stock pursuant to its stock Option Plan;
(iv) Failure of the Company to meet projections will
result in no bonuses being issued.
3. Discretionary Bonuses: In addition to the above, discretionary bonuses can
be issued by the Chairman based on exceptional
individual performances.
4. Use of Vehicle: You will be provided a company vehicle or SIX
HUNDRED DOLLARS ($600.00) monthly compensation for
use of your automobile.
5. Moving Costs and The company will reimburse you for Transition
Provisions moving expenses including closing costs.
An apartment will be provided for your use during a
transition period so that you can live in
Louisville or Lexington, Kentucky yet work in
Ashland, Kentucky. It is recognized that your job
will entail considerable travel and that much of
that travel could best be handled out of either of
those cities. It is therefore expected that you
will work at least one (1) day outside of Ashland,
Kentucky during the transition period.
6. Upon Merger or If the company is taken over by another company
Acquisition due to acquisition or merger and your job is
of the Company: eliminated for reasons other than failure of
performance on your part, then the new management
shall be required to grant you severance pay of no
less than $300,000.00 or employ you for at least
THREE (3) years.
<PAGE>
The above should properly reflect your agreement with Addington Resources,
Inc. and will become an enforceable contract upon execution and return of said
document. This document will have no force and effect unless returned to
Addington Resources, inc. within TEN (10) days of the date of this letter.
With kindest regards,
Yours truly,
ADDINGTON RESOURCES, INC.
/s/ Larry Addington
Larry Addington, President
Accepted and Agreed To:
/s/ R. Douglas Striebel
- -----------------------
Douglas Striebel, C.P.A.
<PAGE>
EXHIBIT 10(G)
FOURTH AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
--------------------------
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
(this "Fourth Amendment") is made and entered into as of the 15th day of
December, 1995, by and among ADDINGTON ENVIRONMENTAL, INC., a Kentucky
corporation (the "Parent"), GREEN VALLEY ENVIRONMENTAL CORP. ("Green Valley"),
MID-STATE ENVIRONMENTAL, INC. ("Mid-State"), the Subsidiaries of the Parent
listed on Schedule 1 hereto, (the "Subsidiaries". the Parent, Green Valley, Mid-
State, and such Subsidiaries herein collectively referred to as the
"Borrowers"), each of which Borrowers is a Kentucky corporation, and (unless
otherwise listed on Schedule 1 hereto) each of which Borrowers has its principal
place of business at 771 Corporate Drive, Lexington, Kentucky 40509, ADDINGTON
RESOURCES, INC. ("ARI") and ADDINGTON HOLDING COMPANY, INC., ("AHC"), each of
which companies is a Delaware corporation with its principal place of business
at 1500 North Big Run Road, Ashland, Kentucky 41102 (collectively, the
"Guarantors," and, individually, a "Guarantor"), THE FIRST NATIONAL BANK OF
BOSTON ("FNBB"), a national banking association having its principal place of
business at 100 Federal Street, Boston, Massachusetts 02110, BANK OF AMERICA
ILLINOIS (formerly Continental Bank and Continental Bank N.A.), having its
principal place of business at 231 South LaSalle Street, Chicago, Illinois 60697
(each a "Bank" and collectively, the "Banks"), and FNBB as agent for the Banks
(the "Agent").
WHEREAS, the Borrowers, the Guarantors, the Banks and the Agent have
entered into an Amended and Restated Revolving Credit Agreement dated as of May
31, 1994 as amended June 30, 1994, October 12, 1994, and February 21, 1995 (as
further amended and in effect from time to time, the "Credit Agreement")
pursuant to which the Banks extended credit to the Borrowers on the terms set
forth therein;
WHEREAS, the Banks and the Borrowers have agreed to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition have
the meanings ascribed to them in the Credit Agreement.
<PAGE>
2. AMENDMENT TO (S)3.L. Section 3.1 of the Credit Agreement is hereby
amended to delete the amount "$20,000,000" appearing in the fifteenth line of
Subclause (a) thereof, and to substitute the amount "$30,000,000" in place
thereof.
3. RATIFICATION, ETC.
Except as expressly amended hereby, the Credit Agreement, the other Loan
Documents and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. This Fourth Amendment and the Credit Agreement shall hereafter be
read and construed together as a single document, and all references in the
Credit Agreement or any related agreement or instrument to the Credit Agreement
shall hereafter refer to the Credit Agreement as amended by this Fourth
Amendment.
4. GOVERNING LAW.
THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
5. COUNTERPARTS. This Fourth Amendment may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Banks.
6. EFFECTIVENESS. This Fourth Amendment shall become effective upon
its execution and delivery by the respective parties hereto.
7. ENTIRE AGREEMENT. THE CREDIT AGREEMENT AS AMENDED REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of December 15, 1995.
<PAGE>
THE BORROWERS:
ADDINGTON ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: Chief Executive Officer
------------------------
COLLECTION SERVICES, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
OHIO COUNTY BALEFILL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
EPPERSON WASTE DISPOSAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
TRI-K LANDFILL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
UWHARRIE ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
GREEN VALLEY ENVIRONMENTAL CORP.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
<PAGE>
EAST CAROLINA ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
BROADHURST ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
MID-STATE ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
DOZIT CO., INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
MULLIS TREE SERVICE, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
PINELLAS ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
THE GUARANTORS:
ADDINGTON RESOURCES, INC.
By: /s/ R. Douglas Striebel
---------------------------
Title: Vice President
------------------------
<PAGE>
ADDINGTON HOLDING COMPANY, INC.
By: /s/ R. Douglas Striebel
---------------------------
Title: Vice President
------------------------
THE BANKS:
THE FIRST NATIONAL BANK OF BOSTON, individually
and as Agent
By: /s/ Arthur Oberheim
---------------------------
Title: Vice President
------------------------
BANK OF AMERICA ILLINOIS
(formerly Continental Bank and Continental Bank
N.A.)
By: /s/ Lori R. Woodland
---------------------------
Title: Vice President
------------------------
<PAGE>
FIFTH AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
--------------------------
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
(this "Fifth Amendment") is made and entered into as of the 24th day of January,
1996, by and among ADDINGTON ENVIRONMENTAL, INC., a Kentucky corporation (the
"Parent"), GREEN VALLEY ENVIRONMENTAL CORP. ("Green Valley"), MID-STATE
ENVIRONMENTAL, INC. ("Mid-State"), the Subsidiaries of the Parent listed on
Schedule 1 hereto, (the "Subsidiaries", the Parent, Green Valley, Mid-State, and
such Subsidiaries herein collectively referred to as the "Borrowers"), each of
which Borrowers is a Kentucky corporation, and (unless otherwise listed on
Schedule 1 hereto) each of which Borrowers has its principal place of business
at 771 Corporate Drive, Suite 900, Lexington, Kentucky 40503, ADDINGTON
RESOURCES, INC. ("ARI") and ADDINGTON HOLDING COMPANY, INC., ("AHC"), each of
which companies is a Delaware corporation with its principal place of business
at 1500 North Big Run Road, Ashland, Kentucky 41102 (collectively, the
"Guarantors," and, individually, a "Guarantor"), THE FIRST NATIONAL BANK OF
BOSTON ("FNBB"), a national banking association having its principal place of
business at 100 Federal Street, Boston, Massachusetts 02110, BANK OF AMERICA
ILLINOIS (formerly Continental Bank and Continental Bank N.A.), having its
principal place of business at 231 South LaSalle Street, Chicago, Illinois 60697
(each a "Bank" and collectively, the "Banks"), and FNBB as agent for the Banks
(the "Agent").
WHEREAS, the Borrowers, the Guarantors, the Banks and the Agent have
entered into an Amended and Restated Revolving Credit Agreement dated as of May
31, 1994 as amended June 30, 1994, October 12, 1994, February 21, 1995, and
December 15, 1995 (as further amended and in effect from time to time, the
"Credit Agreement") pursuant to which the Banks extended credit to the Borrowers
on the terms set forth therein;
WHEREAS, the Banks and the Borrowers have agreed to amend the Credit
Agreement as hereinafter set forth,
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition have
the meanings ascribed to them in the Credit Agreement.
<PAGE>
2. Amendment to (S)1.1. The definition of "Maturity Date" appearing in
(S)1.l of the Credit Agreement is hereby deleted in its entirety and the
following substituted in place thereof:
"Maturity Date. July 31, 1997."
3. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Fifth Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Fifth Amendment. By executing this Fifth Amendment where
indicated below, each of the Guarantors hereby ratifies and confirms its
guaranty of the Obligations.
4. GOVERNING LAW.
THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
5. COUNTERPARTS. This Fifth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Banks.
6. EFFECTIVENESS. This Fifth Amendment shall become effective upon its
execution and delivery by the respective parties hereto.
7. ENTIRE AGREEMENT. THE CREDIT AGREEMENT AS AMENDED REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of December 15, 1995.
<PAGE>
THE BORROWERS:
ADDINGTON ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: Chief Executive Officer
------------------------
COLLECTION SERVICES, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
OHIO COUNTY BALEFILL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
EPPERSON WASTE DISPOSAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
TRI-K LANDFILL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
UWHARRIE ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
GREEN VALLEY ENVIRONMENTAL CORP.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
<PAGE>
EAST CAROLINA ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
BROADHURST ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
MID-STATE ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
DOZIT CO., INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
MULLIS TREE SERVICE, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
PINELLAS ENVIRONMENTAL, INC.
By: /s/ Jack T. Baker
---------------------------
Title: President
------------------------
THE GUARANTORS:
ADDINGTON RESOURCES, INC.
By: /s/ R. Douglas Striebel
---------------------------
Title: Vice President
------------------------
<PAGE>
ADDINGTON HOLDING COMPANY, INC.
By: /s/ R. Douglas Striebel
---------------------------
Title: Vice President
------------------------
THE BANKS:
THE FIRST NATIONAL BANK OF BOSTON, individually
and as Agent
By: /s/ Arthur Oberheim
---------------------------
Title: Vice President
------------------------
BANK OF AMERICA ILLINOIS
(formerly Continental Bank and Continental Bank
N.A.)
By: /s/ Lori R. Woodland
---------------------------
Title: Vice President
------------------------
<PAGE>
Exhibit 21. List of Subsidiaries at March 15, 1996
--------------------------------------
Name of Subsidiary (1) Place of Incorporation
---------------------- ----------------------
Addington Holding Company, Inc. (2) Delaware
Mid-State Environmental, Inc. (3) Kentucky
Green Valley Environmental Corp. Kentucky
New River Lime, Inc. Kentucky
Addington Environmental, Inc. Kentucky
Collection Services, Inc. (4) Kentucky
Ohio County Balefill, Inc. (4) Kentucky
East Carolina Environmental, Inc. (4) Kentucky
Epperson Waste Disposal, Inc. (4) Kentucky
Tri-K Landfill, Inc. (4) Kentucky
Uwharrie Environmental, Inc. (4) Kentucky
Pinellas Environmental, Inc. (4) Kentucky
Mullis Tree Service, Inc. (4) Georgia
Broadhurst Environmental, Inc. (4) Kentucky
Dozit Co., Inc (4) Kentucky
Upper Piedmont Environmental, Inc. (4) Kentucky
___________________
(1) All of the Company's subsidiaries do business under the listed name, except
Collection Services, Inc., which does business under the following names:
M&M Sanitation, Inc., Epperson Collection Services, HAL Industries, Inc.,
CSI of Northern Kentucky, B&J Sanitation, CSI of Georgia, Pennyrile
Sanitation, and Bluegrass Waste Alliance.
(2) Except as otherwise indicated, all of the subsidiaries listed below are
wholly owned by Addington Holding Company, Inc. which is a wholly owned
subsidiary of Addington Resources, Inc.
(3) A wholly owned subsidiary of Addington Resources, Inc.
(4) A wholly owned subsidiary of Addington Environmental, Inc.
<PAGE>
EXHIBIT 23
----------
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our reports included in the Form 10-K into the Company's
previously filed Registration Statement File No. 33-34559 and Registration
Statement File No. 33-58363.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Louisville, Kentucky
March 25, 1996
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