<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1995
COMMISSION FILE NO. 0-16102
EASTERN ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
59-2840783
(I.R.S. Employer Identification No.)
ROUTE 309 NORTH, RR #4, BOX 4452, DRUMS, PA 18222
(Address of Principal Executive Offices)
Registrant's Telephone No., including area code: (717) 788-6075
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock:
As of May 10, 1995 2,799,004 Shares of Common Stock
1,591,201 Shares of Class A Common Stock
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
Form 10-Q
Quarter Ended March 31, 1995
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - March 31, 1995
and June 30, 1994 1-2
Consolidated Statements of Income for the three
months ended March 31, 1995 and 1994 3
Consolidated Statements of Income for the nine
months ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows for the
nine months ended March 31, 1995 and 1994 5-6
Notes to Consolidated Financial Statements 7-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
PART II - OTHER INFORMATION
Item 2 - Legal Proceedings 15
SIGNATURES 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Eastern Environmental Services, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 377,072 $ 785,749
Accounts receivable, less allowance for
doubtful accounts of $335,201
and $324,540 1,464,415 1,804,922
Notes receivables 44,914 191,954
Deferred income taxes 142,930 78,036
Tax refund receivable 130,807 143,467
Prepaid expenses and other current assets 645,831 677,546
Current assets of discontinued operations 50,590 117,575
----------- -----------
Total current assets 2,856,559 3,799,249
Property and equipment:
Land 160,852 160,852
Landfill Sites 10,317,763 9,442,633
Buildings and leasehold improvements 1,513,955 1,490,118
Vehicles 1,760,624 1,790,313
Machinery and equipment 3,608,308 3,305,386
Furniture and fixtures 630,500 597,167
----------- -----------
Total property and equipment 17,992,002 16,786,469
Accumulated depreciation and amortization 6,315,832 5,004,623
----------- -----------
11,676,170 11,781,846
Noncurrent assets of discontinued operations 521,075 534,650
Intangible assets, net of $3,049,538 and
$2,917,137 accumulated amortization 525,916 696,568
Other assets, including $540,789 and
$526,452 of restricted cash on deposit
for landfill closure and insurance bonding 857,067 656,133
----------- -----------
Total assets $16,436,787 $17,468,446
=========== ===========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 350,000 $ 100,000
Accounts payable 1,714,345 2,155,358
Accrued expenses 387,871 565,971
Note payable to shareholder/officer 42,457 0
Income taxes payable 87,452 103,267
Current liabilities relating to
discontinued operations 5,500 61,500
Current portion of accrued landfill
closure and other environmental costs 800,000 300,000
Current portion of long-term debt 1,047,064 847,283
----------- -----------
Total current liabilities 4,434,689 4,133,379
Deferred income taxes 215,282 364,388
Long-term debt 1,750,575 1,993,951
Accrued landfill closure and other
environmental costs 1,096,246 1,370,627
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued shares - 2,838,104 28,381 28,381
Class A common stock (convertible to
common stock), $.01 par value:
Authorized shares - 10,000,000
Issued shares - 1,591,201 15,912 15,912
Additional paid-in capital 7,349,278 7,349,278
Retained earnings 1,622,683 2,288,789
----------- -----------
9,016,254 9,682,360
Less treasury stock at cost - 39,100
common shares 76,259 76,259
----------- -----------
Total stockholders' equity 8,939,995 9,606,101
----------- -----------
Total liabilities and stockholders' equity $16,436,787 $17,468,446
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenues $2,106,708 $1,760,942
Cost of revenues 1,676,322 1,417,089
---------- ----------
Gross profit 430,386 343,853
Selling, general and administrative expenses 749,558 841,565
---------- ----------
Operating loss (319,172) (497,712)
Interest expense (61,549) (56,391)
Other income 51,838 48,499
---------- ----------
Loss from continuing operations before income taxes (328,883) (505,604)
Income tax benefit 56,000 175,000
---------- ----------
Net loss $ (272,883) $ (330,604)
========== ==========
Loss per share $(.06) $(.07)
========== ==========
Weighted average number of shares outstanding 4,390,205 4,390,205
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenues $6,624,498 $6,273,095
Cost of revenues 5,390,165 4,526,709
---------- ----------
Gross profit 1,234,333 1,746,386
Selling, general and administrative expenses 2,205,608 2,482,877
---------- ----------
Operating loss (971,275) (736,491)
Interest expense (167,911) (154,292)
Other income 227,080 117,009
---------- ----------
Loss from continuing operations
before income taxes (912,106) (773,774)
Income tax benefit 246,000 309,000
---------- ----------
Loss from continuing operations (666,106) (464,774)
Discontinued operations:
Gain on disposal of discontinued
operations, net of applicable income
taxes of $225,000 - 225,000
---------- ----------
Net loss $ (666,106) $ (239,774)
========== ==========
(LOSS) EARNINGS PER SHARE
Continuing operations $ (.15) $ (.10)
Discontinued operations - .05
---------- ----------
Net loss per share $ (.15) $ (.05)
========== ==========
Weighted average number of shares
outstanding 4,390,205 4,390,205
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations $ (666,106) $ (464,774)
Adjustments to reconcile loss from
continuing operations to net cash provided
by operating activities of continuing operations:
Depreciation and amortization 1,525,389 1,125,288
Provision for losses on receivables 20,000 74,000
Landfill closure costs 225,619 330,036
Deferred income taxes (214,000) 125,785
Gain on sale of property and equipment (686) (12,176)
Changes in operating assets and liabilities:
Accounts receivable 320,507 (129,221)
Other receivables - 15,864
Tax refund receivable 12,660 (188,381)
Prepaid expenses 420,326 119,666
Other assets (229,971) (10,762)
Accounts payable (441,013) 698,115
Accrued expenses (178,100) 26,483
Income taxes payable (15,815) -
---------- ----------
Net cash provided by operating activities
of continuing operations 778,810 1,709,923
Cash provided by
discontinued operations 16,440 689,648
</TABLE>
See accompanying notes.
5
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 27,740 393,160
Purchase of property and equipment (1,190,173) (2,174,817)
Landfill closure and insurance bonding deposits (14,337) (432,596)
Payments received on notes receivable 189,592 145,753
----------- -----------
Net cash used in investing activities (987,178) (2,068,500)
FINANCING ACTIVITIES
Proceeds from revolving line of credit
and long-term debt 525,000 365,383
Payments on revolving line of credit
and long-term debt (784,206) (737,778)
Net proceeds from note payable to
shareholder/officer 42,457 -
----------- -----------
Net cash used in financing
activities (216,749) (372,395)
Net decrease in cash and
cash equivalents (408,677) (41,324)
Cash and cash equivalents at beginning
of period 785,749 734,805
----------- -----------
Cash and cash equivalents at end
of period $ 377,072 $ 693,481
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE>
Eastern Environmental Services, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements include the
accounts of Eastern Environmental Services, Inc. (the "Company") and its
subsidiaries, all of which are wholly-owned. All significant intercompany
accounts and transactions have been eliminated in consolidation. These
financial statements reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of results for the interim
periods presented. The results of operations for the period ended March 31,
1995 are not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These interim financial statements should be
read in conjunction with the audited financial statements and notes contained in
the Company's Annual Report on Form 10-K for the year ended June 30, 1994.
2. DISCONTINUED OPERATIONS
On October 22, 1993, the Company sold substantially all of the assets (excluding
real property) of its wholly owned laboratory services subsidiary, Advanced
Analytical Laboratories, Inc. ("AAL"), in exchange for $55,000 in cash and a
secured promissory note in the amount of $380,000, and the value of a "Sales
Bonus" defined as five percent of the gross sales of AAL's business during the
one year period following the closing date up to a maximum of $60,000. The
promissory note, which was secured by a first priority lien on all assets
transferred by AAL to the buyer was paid in full on October 22, 1994. The
maximum sales bonus was earned by the Company.
On January 31, 1994, the Company sold certain assets (principally disposable
supplies) and assigned certain contracts and customer accounts of its wholly
owned asbestos and lead paint abatement services subsidiaries, Eastern
Environmental Services of the Northeast, Inc., and Eastern Environmental
Services of the Southeast, Inc. ("EESNE/SE"), in exchange for $14,000 in cash
and the value of a "Revenue Override" defined as four percent of all gross
revenue from certain "Qualifying Clients," as defined in an Assignment and
Assumption Agreement, through March 31, 1996, up to a maximum of $200,000. A
revenue override of approximately $23,000 was earned and recorded through
March 31, 1995.
7
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The assets and liabilities relating to discontinued operations in the
consolidated balance sheets have been reclassified to identify them separately
at the lower of cost or net realizable value and net of any liabilities assumed.
Remaining assets and liabilities relating to discontinued operations are as
follows at March 31, 1995:
<TABLE>
<S> <C>
Current assets:
Accounts receivable $ 50,590
========
Noncurrent assets:
Property and equipment, net $521,075
========
Current liabilities:
Reserve for operating losses $ 5,500
========
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUING OPERATIONS
The following table presents, for the periods indicated, the percentage that
each item in the Consolidated Statements of Income bears to total revenues
relating to continuing operations.
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-----------------
1995 1994
----- -----
<S> <C> <C>
Revenues.......................... 100.0 100.0
Cost of revenues.................. 81.4 72.2
----- -----
Gross profit...................... 18.6 27.8
Selling, general and
administrative expenses.......... 33.3 39.5
----- -----
Operating loss.................... (14.7) (11.7)
Other income (expense)............ .9 (.6)
----- -----
Loss before income taxes
from continuing operations...... (13.8) (12.3)
Income tax benefit................ 3.7 4.9
----- -----
Net loss from
continuing operations........... (10.1) (7.4)
Depreciation and amortization
from continuing operations
included in above costs......... 23.0 17.9
</TABLE>
9
<PAGE>
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE
NINE MONTHS ENDED MARCH 31, 1994
Revenue from continuing operations increased $351,000 from $6,273,000 for the
nine months ended March 31, 1994 to $6,624,000 for the nine months ended March
31, 1995. Revenues increased $351,000 or 34.0% in the first nine months of
fiscal 1995 at the Company's South Carolina landfill and $72,000 or 5.3% at the
Company's West Virginia landfill. The Company also experienced a $134,000 or
3.8% increase in revenues at the Company's hauling operations. These increases
were partially offset by a 38.3% or $314,000 decline in revenue at the Company's
Kentucky landfill. The increase in the South Carolina landfill's revenue
reflects a significant increase in landfill based hauling revenues and sales
efforts which contributed to an overall 47.7% increase in waste disposal volume
in the first nine months of fiscal 1995 as compared to the same period in fiscal
1994. The increase in revenues at the Company's West Virginia facility included
a 47.8% increase in municipal solid waste (MSW) revenues, a 57.7% decline in
asbestos volumes, and a greater than 100% increase in construction and
demolition debris and other industrial waste streams. The 47.8% or $349,000
increase in MSW revenues includes a 16.45% increase in volume reflective of the
increase in availability of MSW as certain private and municipally owned
landfills continue to close as a result of an inability to comply with the
federal Subtitle D regulations and state regulations requiring more
sophisticated liner systems along with an increase on July 1, 1994 in the MSW
rate the Company may charge as regulated by the West Virginia Public Service
Commission from $22.50 per ton to $28.25 per ton. The increase in revenues in
the Company's long-haul transportation operations reflects an increase in
hauling capacity through employment of additional vehicles. The continued
reduction in volume and revenue at the Company's Kentucky facility relates to
the Company's decision to implement self-imposed volume limitations based on
management's revised permitting schedule for the expansion area. As a result,
monthly revenue at the Company's Kentucky facility has been reduced in several
incremental steps since January 1, 1994, to the current level of approximately
$50,000 per month or 25% of normal operating levels which results in a current
operating loss at this facility. Management has virtually ceased the acceptance
of asbestos and other special waste streams at the Kentucky facility and is
primarily accepting only MSW from the host county. The Company will be required
to cease placing waste in the existing area on July 1, 1995.
Cost of revenues from continuing operations for the nine months ending March 31,
1995 increased from the same period in fiscal 1994 by approximately $863,000 or
19.1% to $5,390,000. The percentage increase was due primarily to the increased
rate of amortization of airspace and the cost of leachate management recognized
at the Company's West Virginia landfill as the facility now operates under the
more stringent federal Subtitle D regulations requiring more sophisticated liner
systems and leachate management programs; current average waste acceptances of
approximately 58% of allowable waste acceptance volume at the Company's West
Virginia landfill in the first nine months of fiscal 1995 as certain waste
streams are being replaced with more lucrative waste streams; further self-
imposed decreases in volume at the Company's Kentucky landfill only partially
offset by reductions in daily operating costs; increased costs of non-affiliated
waste disposal costs to increase logistic efficiencies at the Company's long-
haul transportation company; and less favorable operating
10
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margins in the first nine months of fiscal 1995 within the local waste
collection business acquired late in the first quarter of fiscal 1993. These
negative developments were partially offset by continued favorable growth in the
Company's South Carolina landfill operations with an increase in gross profit
from $515,000 for the nine months ending March 31, 1994 to $643,000 for the same
period in fiscal 1995.
Selling, general and administrative expenses ("SG&A") from continuing operations
decreased $277,000 or 11.2% from $2,483,000 in the first nine months of fiscal
1994 to $2,206,000 in the first nine months of fiscal 1995. SG&A expenses from
continuing operations include substantially all corporate overhead costs
including the costs relating to the accounting, finance, legal and engineering
departments as well as the SG&A costs specifically attributed to the landfill
and waste hauling operations. The decrease in SG&A costs reflects continued
reduced salary and other overhead costs associated with the Company's continuing
cost containment program partially offset by continued expansion of the
Company's marketing and sales force, an increase in external legal and
consultant costs with the elimination of the internal legal staff, and an
increase in fees relating to providing financial assurance for closure and post
closure costs for the Company's landfills.
Other income increased $110,000 for the nine months ended March 31, 1995
compared to the same nine months of fiscal 1994 as a result of recognition of a
gain on the sale of certain assets of the Company's local waste collection
business in South Carolina and the recording of additional consideration earned
as part of the sale of the Company's asbestos abatement and laboratory testing
operations. Interest expense remained relatively constant for the first nine
months of fiscal 1995 compared to the same nine months of fiscal 1994.
The Company's effective income tax rate, including both federal and state taxes,
was 27.0% for the nine months ended March 31, 1995 compared to 40.0% for the
nine months ended March 31, 1994. Non-deductibility for tax purposes of
goodwill associated with landfill acquisitions combined with a lower base of
pre-tax income results in the effective tax rate for the current year being less
than the federal and state statutory rates. Additionally, income tax benefit
for the first nine months of fiscal 1995 and 1994, as included within the
accompanying financial statements, have been recorded in accordance with SFAS
No. 109, "Accounting for Income Taxes".
As a result of factors discussed above, a net loss from continuing operations of
$666,000 or $.15 per share was recognized for the nine months ended March 31,
1995 as compared to a loss of $465,000 or $.10 per share for the nine months
ended March 31, 1994. The Company believes that it continues to be affected by
reductions in renovation, construction and demolition projects and asbestos
waste volumes.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995, COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1994
Results of continuing operations for the three months ended March 31, 1995,
compared to the three months ended March 31, 1994, reflects an increase in net
sales of $346,000, a decrease in
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operating losses of $179,000 and a decrease in net losses from continuing
operations of $58,000 or $.01 per share. These changes were attributable to the
same factors discussed previously with respect to the nine month periods ended
March 31, 1995, and March 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, current liabilities of $4,435,000 exceeded current assets of
$2,857,000 which includes cash and cash equivalents of $377,000. The Company
incurred additional short term borrowings of $250,000 to fund a trust account as
collateral for the Company's Pennsylvania workers' compensation self insurance
program. The trust account is restricted from current operations and is
included within other non-current assets. The Company also increased the
current portion of accrued landfill closure costs by $500,000, reduced its
deposits in an interest earning trust fund as closure and post-closure financial
assurance related to its Kentucky landfill by $207,000 and reduced outstanding
long term debt by $244,000. A significant portion of working capital expended
during the period, approximately $1,190,000, was used to fund the acquisition of
property and equipment, including $875,000 related to the permitting and
development of landfill space and $315,000 for the purchase of operating
equipment. The Company expects capital expenditures of approximately $500,000
for the remainder of fiscal 1995 for existing landfill expansion, new facility
construction and equipment additions.
The Company is a party to a $4,500,000 credit facility with Philadelphia
National Bank ("PNB"), including a $3,000,000 refinancing term note (paid down
to $1,200,000 as of May 1, 1995), and a secured revolving line of credit
providing for aggregate borrowings of up to $1,500,000 for working capital,
equipment purchases and performance letters of credit. Certain advance approval
procedures exist for borrowing under the secured revolving credit facility. The
PNB credit facility provides for interest at prime plus 1/4% to 1/2% and is
secured by substantially all of the tangible and intangible assets of the
Company, including first mortgage liens on the landfill properties and a pledge
by the Company of all of the issued and outstanding capital stock of its
landfill subsidiaries. The credit facility, as amended, contains warranties and
financial covenants. Certain financial covenants based on results of operations
and financial position for the nine months ending March 31, 1995, were not
achieved by the Company. An appropriate waiver was obtained from the bank in
addition to an extension of the term note to April 1, 1996.
The Company currently owns three solid waste landfills in the United States, all
of which are permitted and operating. The Company will have financial
obligations related to closure and post-closure monitoring and maintenance of
these currently permitted and operating landfills. While the exact amount of
future closure obligations cannot be determined, the Company estimates that the
costs of final closure of the currently permitted and operating areas at the
Company's three landfills will be approximately $5,100,000, of which $1,268,000
has been accrued as of March 31, 1995. The Company estimates that the costs of
post-closure monitoring of groundwater and methane gas and other required
maintenance procedures for the currently permitted and expansion areas will
approximate $27,000 - $120,000 per year for 30 years after closure at each of
the Company's two municipal solid waste accepting facilities and $10,000 per
12
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year for 30 years after closure at the Company's industrial landfill site. The
Company has accrued $628,000 for post-closure obligations as of March 31, 1995,
representing approximately 17% of the present value of such future cash outlays.
The Company's continued operation and development of currently owned landfills
and the future growth of the Company will depend upon its ability to raise
additional capital. The Company's inability to raise additional capital and
obtain additional credit facilities within the next six to twelve months would
have a material adverse impact on the Company's business and may preclude it
from obtaining or retaining landfill operating permits.
The Company is also in the process of finalizing a management agreement to
manage a proposed municipal solid waste landfill in Illinois. The landfill
expansion area has received local approval and an application to the State for
permit approval was submitted in November 1994. A state permit would be
expected to be granted during the 1995 calendar year with construction and
operation expected to occur during 1996. The Company has incurred and
capitalized legal, engineering, and other permitting costs totalling $234,000
through March 31, 1995. Construction cost, closure and post-closure costs will
be comparable with those of the Company's West Virginia and Kentucky landfills
previously described.
The Company maintains payment bonds for financial assurance for closure and
post-closure monitoring cost requirements for its Kentucky and West Virginia
facilities, of which bonds totalling $1,601,000 were outstanding at March 31,
1995. The bonds are collateralized by a $626,000 irrevocable letter of credit
and $104,000 of deposits in an irrevocable trust fund. Additionally, the Company
has on deposit $187,000 as financial assurance for landfill closure and post-
closure for its West Virginia disposal facility. The trust fund and the cash
deposits are restricted from current operations and are included within other
non-current assets.
A potential property damage claim may exist relating to alleged sedimentation
overflow for a landfill holding pond. While no detectable levels of
contamination exist, the Company may be required to perform clean-up activities
regarding the sedimentation. The Company has accrued a liability of $25,000 at
March 31, 1995 relating to potential clean up costs of this property.
The Company received approval of a Host Agreement and local approval for its 43
acre expansion area at its Kentucky landfill from the local Solid Waste
Management Board in December 1994 and is currently seeking final state permit
approval. Although the Company expects to receive an expansion permit for the
Kentucky site, there can be no assurance that an expansion permit will be
obtained. The Company expects that it will incur substantial capital costs to
construct the expansion areas and meet certain regulatory compliance standards.
The Company intends to fund such capital requirements through use of existing
credit arrangements, cash generated by continuing operations, and other debt or
equity placements which the Company is currently seeking. The Company's
inability to obtain the expansion permit could have a material adverse impact on
the results of operations.
Government regulation of the Company's operations has increased significantly
over the last few years and may continue in the future. As a result, the Company
may incur additional capital
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<PAGE>
expenditures which could adversely affect its operating results and financial
condition. Due to the difficulty and time constraints on permitting, the
Kentucky landfill will not have the expansion area in operation by July 1, 1995
which is the date it must cease placing waste in the existing area. The
landfill will seek to operate a transfer station to service the local waste
needs or may experience a temporary shutdown.
DISCONTINUED OPERATIONS
As of June 30, 1994, the Company had substantially discontinued its operations
within the asbestos and lead paint abatement and laboratory services segments.
Management believes that the shedding of the asbestos abatement and laboratory
testing operations will allow the Company to focus its capital, time and efforts
on the expansion and development of its waste hauling and disposal operations.
Final anticipated cash flow from discontinuing the operations, largely from the
sale of real estate and equipment with an aggregate estimated net realizable
value of $521,000 and settlement of current assets in excess of current
liabilities, will be used for expansion of the Company's currently owned and
operated disposal facilities.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
As discussed in the Company's filing on Form 10-Q for the quarter ended December
31, 1994, an administrative action was filed with the Kentucky Cabinet of
Natural Resources and Environmental Protection (the "Cabinet") in April 1993 by
a local citizens group. This suit challenges certain aspects of the Kentucky
landfill's permit authority, including the adequacy of various notices, hearing
procedures, local approvals, and written authorizations received over the past
year. The suit also challenges the legality of various regulations and actions
by the Cabinet and the adequacy of the Kentucky landfill's groundwater
monitoring program. Although the Company anticipates a favorable resolution of
the issues raised in this action, there can be no assurance that such a result
will be achieved. The current landfill area is expected to close July 1, 1995.
In February 1995, Battle Ridge Companies ("Battle Ridge") filed a complaint
against the Company and certain other defendants in the Circuit Court of
Harrison County, West Virginia (No. 95-C-106) seeks additional payment for
excavation and development work performed at the Company's West Virginia
landfill. The complaint alleges that Battle Ridge is entitled to contract
damages of at least $460,000, a $100,000 project bonus, $1 million in punitive
damages, as well as interest, consequential damages and attorney's fees. The
Company has filed a counterclaim against Battle Ridge claiming that Battle Ridge
breached its contract with the Company and is required to pay liquidated and
other damages to the Company. The Company believes that it has substantial
defenses to the allegations in the complaint and intends to vigorously defend
against the action.
The Company is not currently involved in any other material litigation,
including material litigation arising from federal, state or local provisions
that have been enacted for the purpose of protecting the environment.
Management believes that the ultimate resolution of these matters will not have
a material adverse impact on the Company's business or its financial condition.
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY:
/s/ William C. Skuba
---------------------------------------
William C. Skuba
Chairman
BY:
/s/ Gregory M. Krzemien
--------------------------------------
Gregory M. Krzemien
Chief Financial Officer
DATE: May 12, 1995
16
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<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-START> JAN-01-1995 JUL-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1995
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0 0
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