<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K/A
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 27, 1996
EASTERN ENVIRONMENTAL SERVICES, INC.
------------------------------------
(Exact name of issuer as specified in charter)
Delaware 0-16102 59-2840783
(State or Other Jurisdiction Commission (I.R.S. Employer
or Incorporation or file number Identification
Organization) Number)
1000 CRAWFORD PLACE, MT. LAUREL, NEW JERSEY 08054
(Address of principal executive offices)
(609) 235-6009
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- -----------------------------------------------
On September 27, 1996, the Registrant consummated the acquisition of
Super Kwik, Inc., a New Jersey Corporation ("Super Kwik") and Waste Maintenance
Services, Inc., a New Jersey Corporation ("Maintenance") pursuant to the terms
of an Agreement of Merger dated July 29, 1996, among the Registrant, Super Kwik,
Maintenance, and Willard and Glen Miller (the "Shareholders"). The description
of the acquisition transaction set forth herein is qualified in its entirety by
reference to the Merger Agreement. The Merger Agreement is incorporated as
Exhibit 10.1.
Pursuant to the Agreement of Merger, Super Kwik and Maintenance were
merged into NHD, Inc., a wholly owned subsidiary of the Registrant, resulting in
the Shareholders receiving 2,308,176 shares of the Registrant's common stock in
exchange for all issued and outstanding shares of Super Kwik and Maintenance.
The 2,308,176 shares of the Registrant's common stock were valued at $6.50 per
share (the closing price of the Registrant's common stock on the business day
five (5) days prior to the closing date), representing aggregate consideration
of $15,003,144. No cash was paid to the Shareholders for the acquisition of the
shares of Super Kwik and Maintenance. The acquisition is accounted for using
the "pooling of interests" method of accounting. The Registrant has agreed to
register the stock under the Securities Act of 1933 within 90 days of the date
of closing pursuant to the terms of the Registration Rights Agreement dated
September 27, 1996. The Registration Rights Agreement is incorporated as
Exhibit 10.2.
The acquired assets would be used by the Registrant in the waste
collection and disposal business. The Shareholders, Willard and Glen Miller,
were hired by the Registrant as President and Vice-President, respectively, to
oversee the Super Kwik and Maintenance operations.
<PAGE>
ITEM 7. COMBINED FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION, AND EXHIBITS
-----------------------------------
(A) COMBINED FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
----------------------------------------------------
Super Kwik, Inc. and Waste Maintenance Services, Inc.
Independent Auditor's Report.
Combined Balance Sheets as of June 30, 1996, 1995 and 1994.
Combined Statements of Income for the years ended June 30, 1996, 1995 and
1994.
Combined Statements of Retained Earnings for the years ended June 30, 1996,
1995 and 1994.
Combined Statements of Cash Flows for the years ended June 30, 1996, 1995
and 1994.
Notes to Combined Financial Statements.
(B) PRO FORMA FINANCIAL INFORMATION.
Eastern Environmental Services, Inc.
Pro Forma Consolidated Statements of Operations for the years ended June
30, 1996, 1995 and 1994 (Unaudited).
Pro Forma Consolidated Statement of Operations for the three months ended
September 30, 1996 (Unaudited).
Pro Forma Consolidated Balance Sheet as of June 30, 1996 (Unaudited).
Pro Forma Consolidated Balance Sheet as of September 30, 1996 (Unaudited).
(C) EXHIBITS.
* 10.1 Agreement of Merger dated July 29, 1996 between
Eastern Environmental Services, Inc. and Super Kwik,
Inc., Waste Maintenance Services, Inc., Willard Miller and Glen
Miller.
<PAGE>
* 10.2 Registration Rights Agreement dated September 27, 1996 between
Eastern Environmental Services, Inc. and Willard Miller.
(Pursuant to Instruction 2 to Item 601 of Regulation S-K, the
Registration Rights Agreement, which is substantially identical
in all material respects except as to the party thereto, between
the Registrant and Glen Miller is not being filed.)
23.1 Consent of Bardall, Weintraub P.C.
________________________________________________________________________________
* Incorporated by reference
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EASTERN ENVIRONMENTAL SERVICES, INC.
Date: July 10, 1997 By: /s/ Louis D. Paolino, Jr.
___________________________
Louis D. Paolino, Jr.
President
<PAGE>
C O N T E N T S
Independent Auditor's Report 1
Combined Comparative Balance Sheet 2
Combined Comparative Statement of Income 3
Combined Comparative Statement of Retained Earnings 4
Combined Comparative Statement of Cash Flows 5 - 6
Notes to the Combined Comparative Financial Statements 7 - 10
<PAGE>
- --------------------------------------------------------------------------------
Bardall, Weintraub P.C.
Certified Public Accountants
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Super Kwik, Inc. and Waste Maintenance Services, Inc.
We have audited the accompanying combined comparative balance sheet of Super
Kwik, Inc. and Waste Maintenance Services, Inc. as of June 30, 1996, 1995, and
1994 and the related combined comparative statements of income, retained
earnings and cash flows for the years then ended. These combined comparative
financial statements are the responsibility of the corporations' management.
Our responsibility is to express an opinion on these combined comparative
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined comparative financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined comparative
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
audit provides a reasonable basis for our opinion.
In our opinion, the combined comparative financial statements referred to above
present fairly, in all material respects, the combined comparative financial
position of Super Kwik, Inc. and Waste Maintenance Services, Inc. as of June 30,
1996, 1995 and 1994 and the combined comparative results of its operations and
changes in cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Bardell, Weintraub P.C.
BARDALL, WEINTRAUB P.C.
Turnersville, New Jersey 08012
September 30, 1996
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
COMBINED COMPARATIVE BALANCE SHEET
JUNE 30, 1996, 1995 AND 1994
A S S E T S
<TABLE>
<CAPTION>
CURRENT ASSETS 1996 1995 1994
<S> <C> <C> <C>
Cash 23,185 383,743 11,242
Accounts receivable-net 1,546,212 1,582,833 1,503,192
Other Current Assets 555,140 733,987 640,446
--------- --------- ---------
TOTAL CURRENT ASSETS 2,124,537 2,700,563 2,154,880
PROPERTY AND EQUIPMENT-NET 5,384,395 4,504,408 2,702,178
OTHER ASSETS
Loans receivable-stockholders 432,902 204,001 125,495
Intangible assets-net 723,767 691,978 226,509
--------- --------- ---------
TOTAL OTHER ASSETS 1,156,669 895,979 352,004
--------- --------- ---------
TOTAL ASSETS 8,665,601 8,100,950 5,209,062
========= ========= =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C> <C>
Notes payable-current portion
of long term debt 287,985 310,800 204,996
Obligations under capital lease-current 1,240,358 1,131,924 840,000
Note payable-short term 345,000 0 16,250
Accounts payable 1,023,151 835,888 567,839
Accrued expenses and taxes 369,159 283,394 300,041
--------- --------- ---------
TOTAL CURRENT LIABILITIES 3,265,653 2,562,006 1,929,126
LONG-TERM DEBT
Notes payable 636,637 1,048,226 477,504
Obligations under capital lease 2,774,124 2,197,430 1,096,457
--------- --------- ---------
TOTAL LONG TERM DEBT 3,410,761 3,245,656 1,573,961
DEFERRED TAXES 62,826 84,614 38,588
--------- --------- ---------
TOTAL LIABILITIES 6,739,240 5,892,276 3,541,675
STOCKHOLDERS' EQUITY
Common stock
Super Kwik, Inc.
1000 shares authorized, 100 shares
issued & outstanding, no par value 2,000 2,000 2,000
Waste Maintenance Services, Inc.
1000 shares authorized, 100 shares
issued & outstanding, no par value 100 100 100
Additional paid in capital 61,484 61,484 61,484
Retained earnings 1,862,777 2,145,090 1,603,803
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,926,361 2,208,674 1,667,387
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 8,665,601 8,100,950 5,209,062
========= ========= =========
Note: See Independent Auditor's Report.
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
COMBINED COMPARATIVE STATEMENT OF INCOME
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
6-30-96 6-30-95 6-30-94
<S> <C> <C> <C> <C> <C> <C>
SALES-NET 20,521,676 100.0 18,865,547 100.0 16,000,394 100.0
COST OF SALES
Direct Costs 14,471,657 70.5 13,628,498 72.2 11,695,799 73.1
Depreciation 922,064 4.5 1,108,400 5.9 902,940 5.6
---------- ------- ---------- ----- ---------- -----
TOTAL COST OF SALES 15,393,721 75.0 14,736,898 78.1 12,598,739 78.7
---------- ------- ---------- ----- ---------- -----
GROSS PROFIT 5,127,955 25.0 4,128,649 21.9 3,401,655 21.3
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Operating expense 4,790,198 23.4 3,147,636 16.6 2,763,791 17.3
Interest expense 439,074 2.1 330,671 1.7 276,581 1.7
Depreciation and
amortization expense 202,682 1.0 76,613 .5 100,488 .6
---------- ------- ---------- ----- ---------- -----
TOTAL SELLING,
GENERAL AND
ADMINISTRATIVE
EXPENSES 5,431,954 26.5 3,554,920 18.8 3,140,860 19.6
---------- ------- ---------- ----- ---------- -----
NET INCOME/(LOSS)
FROM OPERATIONS (303,999) (1.5) 573,729 3.1 260,795 1.7
OTHER INCOME 9,599 .0 30,227 .1 8,071 .0
---------- ------- ---------- ----- ---------- -----
NET INCOME/(LOSS)
BEFORE TAXES (294,400) (1.5) 603,956 3.2 268,866 1.7
CORPORATE TAXES (12,087) (.1) 62,669 .3 49,573 .3
---------- ------- ---------- ----- ---------- -----
NET INCOME/(LOSS) (282,313) (1.4) 541,287 2.9 219,293 1.4
========== ======= ========== ===== ========== =====
</TABLE>
Note: See Independent Auditor's Report.
The accompanying notes are an integral part of the financial
statements.
3
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
COMBINED COMPARATIVE STATEMENT OF RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
6-30-96 6-30-95 6-30-94
BEGINNING BALANCE $ 2,145,090 $ 1,603,803 $ 1,384,510
NET INCOME/(LOSS) (282,313) 541,287 219,293
----------- ----------- -----------
ENDING BALANCE $ 1,862,777 $ 2,145,090 1,603,803
========== ========== ==========
Note: See Independent Auditor's Report.
The accompanying notes are an integral part of the financial
statements.
4
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
COMBINED COMPARATIVE STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
6-30-96 6-30-95 6-30-94
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers 20,517,466 18,684,696 16,150,027
Cash paid to suppliers & employees (18,808,625) (16,513,825) (14,618,583)
Interest received 2,063 383 1,126
Interest paid (413,757) (332,588) (282,749)
Corporate taxes paid (2,977) (6,622) (14,876)
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,294,170 1,832,044 1,234,945
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans receivable (213,930) (81,955) 41,107
Purchases of property and equipment (1,914,022) (2,855,811) (962,395)
Cash payments for intangible assets (122,500) (574,950) (92,500)
----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (2,250,452) (3,512,716) (1,013,788)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of debt 2,250,990 3,961,792 2,307,759
Payments of debt (1,655,266) (1,908,619) (2,535,399)
----------- ----------- -----------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES 595,724 2,053,173 (227,640)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (360,558) 372,501 (6,483)
CASH AT BEGINNING OF YEAR 383,743 11,242 17,725
----------- ----------- -----------
CASH AT END OF YEAR 23,185 383,743 11,242
=========== =========== ===========
</TABLE>
Note: See Independent Auditor's Report.
The accompanying notes are an integral part of the financial
statements.
5
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
COMBINED COMPARATIVE STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
6-30-96 6-30-95 6-30-94
<S> <C> <C> <C>
NET INCOME/(LOSS) (282,313) 541,287 219,293
ADJUSTMENTS TO RECONCILE NET INCOME/(LOSS)
TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
(Increase)/Decrease
Accounts receivable (4,210) (180,851) 149,633
Prepaid expenses 176,077 (82,092) (86,365)
Increase/(Decrease)
Accounts payable 187,263 268,049 (63,081)
Accrued expenses 85,765 (16,647) 17,379
Deferred taxes (21,788) 46,026 (42,987)
Deferred Income 0 0 (51,383)
Accrued interest income (12,201) (8,000) (5,795)
Depreciation and amortization 1,124,746 1,185,013 1,003,428
Bad debt 40,831 101,210 95,923
Gain on sale of equipment 0 (21,951) (1,100)
--------- --------- ---------
TOTAL ADJUSTMENTS 1,576,483 1,290,757 1,015,652
--------- --------- ---------
NET CASH FLOW FROM
OPERATING ACTIVITIES 1,294,170 1,832,044 1,234,945
========= ========= =========
</TABLE>
Note: See Independent Auditor's Report.
The accompanying notes are an integral part of the financial
statements.
6
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
NOTES TO THE COMBINED COMPARATIVE FINANCIAL STATEMENTS
SUPER KWIK, INC. was incorporated in January of 1972 under the laws of the State
of New Jersey. The Company is a closely held corporation with its office
located in Voorhees, New Jersey. WASTE MAINTENANCE SERVICES, INC. was
incorporated in the state of New Jersey in March, 1987. The corporation is
closely held. The combined companies provide trash removal service in the area
of Central and Southern New Jersey.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) In combining the financial statements of the two entities, all
inter-company transactions have been eliminated.
(B) Income and expenses are recorded on the accrual method of
accounting.
(C) Property and equipment are carried at cost less accumulated
depreciation. Depreciation is provided primarily on the straight-
line basis over the estimated useful lives of the assets.
(D) Intangible assets are amortized over five (5) or fifteen (15)
years by use of the straight line method.
(E) Waste Maintenance Services, Inc. has elected S corporation status
for federal tax purposes. On January 1, 1994 the company elected S
corporation status for New Jersey state tax purposes. On January
1, 1996, Super Kwik, Inc. elected S corporation status for federal
and state tax purposes. Due to these elections the corporation's
federal and state taxes are the responsiblity of the individual
shareholders and no accrual for federal taxes is reflected to
current income. State corporate taxes are reflected as an accrual
related to current income based on a reduced rate related to state
S corporation status. Waste Maintenance Services Inc. reports
income and expenses for tax purposes utilizing the modified cash
method of accounting.
NOTE 2. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is $122,129, $78,937, $40,914 as
of June 30, 1996, 1995 and 1994, respectively.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following breakdown:
<TABLE>
<CAPTION>
6-30-96 6-30-95 6-30-94
<S> <C> <C> <C>
Leasehold improvements 238,081 235,174 231,304
Containers 4,626,346 3,759,868 2,853,566
Vehicles 6,429,017 5,728,361 4,170,617
Office furniture
& equipment 926,836 582,855 374,321
---------- ---------- ---------
12,220,280 10,306,258 7,629,808
Less: accumulated
depreciation 6,835,885 5,801,850 4,927,630
---------- ---------- ---------
PROPERTY AND
EQUIPMENT - Net 5,384,395 4,504,408 2,702,178
========== ========== =========
</TABLE>
Certain property and equipment is held as security on various notes payable.
7
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
NOTES TO THE COMBINED COMPARATIVE FINANCIAL STATEMENTS
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following breakdown:
<TABLE>
<CAPTION>
6-30-96 6-30-95 6-30-94
<S> <C> <C> <C>
Goodwill 142,400 19,900 19,900
Customer lists 454,218 454,218 79,268
Covenants not to compete 539,763 539,763 339,763
Commitment fees 12,400 12,400 12,400
--------- --------- -------
1,148,781 1,026,281 451,331
Less: accumulated amortization 425,014 334,303 224,822
--------- --------- -------
INTANGIBLE ASSETS-NET 723,767 691,978 226,509
========= ========= =======
</TABLE>
NOTE 5. LOANS RECEIVABLE - STOCKHOLDERS
These loans are non specific as to repayment terms. The interest rate
for 1995 is 6% per annum. For fiscal year ended June 30, 1995 and 1994
the rate is 8% per annum.
NOTE 6. DEFERRED TAXES
A deferred tax liability exists due to different depreciation methods
utilized between tax and financial statement accounting.
NOTE 7. NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASE
A. The note is a bank loan in the amount of $750,000. The note will
mature in September 1997. The note is payable in 60 equal principal
payments of $12,500 per month with interest at 2% over the banks
prime lending rate. The loan is secured by specific pieces of
equipment and vehicles and the guarantees of Waste Maintenance
Services, Inc. and Super Kwik, Inc. and the president of Super
Kwik, Inc.
B. The note is a demand loan with a maximum credit line of $500,000
with interest at 9 1/2% per annum. The loan is secured by the
assets of the corporation.
C. The note is an installment loan in the amount of $187,742. The loan
matures in December 1997. The loan is payable in 48 equal payments
with interest at 8% per annum. The loan is secured by the personal
guarantee of the shareholder.
D. The note is an installment loan in the amount of $925,000. The loan
is being repaid in two separate agreements. The first matures in
February 2000. The second matures in February 2005. The rate of
interest on both agreements is 6.00% per annum. The loan is secured
by the specific assets purchased.
8
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
NOTES TO THE COMBINED COMPARATIVE FINANCIAL STATEMENTS
NOTE 7. NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASE (Continued)
E. The notes consist of equipment financing from various financial
institutions and with varying terms ranging from 36 to 60 months
and with interest rates from four and six-tenths percent (4.6%) to
ten and seven-tenths percent (10.7%).
<TABLE>
<CAPTION>
6-30-96 6-30-95 6-30-94
<S> <C> <C> <C>
A. 190,000 340,000 490,000
B. 345,000 0 16,250
C. 83,150 137,500 0
D. 772,359 881,525 0
E. 3,893,595 3,329,355 2,128,957
--------- --------- ---------
5,284,104 4,688,380 2,635,207
CURRENT PORTION 1,873,343 1,442,724 1,061,246
--------- --------- ---------
LONG-TERM LIABILITIES 3,410,761 3,245,656 1,573,961
========= ========= =========
</TABLE>
FUTURE MATURITIES OF NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASE
ARE AS FOLLOWS:
<TABLE>
<CAPTION>
<S> <C>
For year ended June 30, 1998 $1,664,987
1999 929,464
2000 644,404
2001 171,906
----------
$3,410,761
==========
</TABLE>
NOTE 8. CONCENTRATION OF CREDIT RISKS FROM FINANCIAL INSTRUMENTS
One of the corporations maintains most of its cash balances in one bank
located in New Jersey. These balances are insured by the Federal
Deposit Insurance Corporation up to $100,000. During the year, this
corporation may have cash balances in this financial institution in
excess of this limit. At June 30, 1996 the balances were in excess of
insurable amounts by $107,682.
The trade accounts receivable are concentrated (100%) in the regions
known as central and Southern New Jersey.
9
<PAGE>
SUPER KWIK, INC.
WASTE MAINTENANCE SERVICES, INC.
NOTES TO THE COMBINED COMPARATIVE FINANCIAL STATEMENTS
NOTE 9. 401K PLAN
The company instituted a 401K plan for its employees starting July 1,
1995. Employees can elect to contribute 1 to 15% of their compensation.
The company will match employee contributions 25% on the first 4% of
employee compensation contributed. To participate, employees must
complete 1000 hours of service, 12 months of employment and attain 21
years of age. The employee benefits are vested over 6 years of service
and are fully vested at 6 years of service. For fiscal year ended June
30, 1996, employer contributions were $19,555.
NOTE 10. SUBSEQUENT EVENTS
The company has settled a sales and use tax audit with the State of New
Jersey. The audit covered the periods from 1993 through 1995. The
amount of the settlement was $24,651. The amount paid has been accrued
as of the balance sheet date.
Subsequent to the balance sheet date, the combined entities purchased
and financed vehicles and equipment in the amount of $595,493.
The combined entities merged with Eastern Environmental Services, Inc.
on September 27, 1996. The merger will result in an income tax
liability of approximately $625,000.
NOTE 11. RELATED PARTY TRANSACTIONS
The combined entities contract for management services with a company
that is fifty-percent (50%) owned by the stockholders of the combined
entity. The charges for 1995, 1994 and 1993 were $590,310, $414,240 and
$320,362, respectively.
The combined entities rent real estate from the stockholders. The rents
paid for 1995, 1994 and 1993 were $387,319, $338,017 and $169,454,
respectively.
The stockholder of Waste Maintenance Services, Inc. was owed
compensation in the amount of $167,000 as of the balance sheet date.
The amount has been accrued and expensed in the financial statements.
NOTE 12. ESTIMATES
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.
10
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED SUMMARY OF OPERATIONS FOR THE YEARS ENDED JUNE
30, 1996, 1995 AND 1994.
The following unaudited pro forma consolidated Statements of Operations for
the years ended June 30, 1996, 1995 and 1994 give effect to (i) the acquisition
of Allied Environmental Services, Inc. and Affiliates ("Allied") for
consideration of $700,000 in Eastern Environmental Services, Inc. common stock
at an assumed fair market value of $6.00 per share, and (ii) the acquisition of
Super Kwik, Inc. ("Super Kwik") and Waste Maintenance Services, Inc.
("Maintenance") pursuant to the terms of an Agreement of Merger. The
Shareholders of Super Kwik and Maintenance received 2,308,176 shares of the
Registrant's common stock in exchange for all issued and outstanding shares of
Super Kwik and Maintenance. The above transactions are presented as if they had
occurred on July 1, 1993. The Super Kwik and Maintenance acquisition is
accounted for as a "pooling of interests." As a result, no material pro forma
adjustments were deemed necessary to reflect the results of operations on a
consolidated basis for this acquisition.
The following unaudited pro forma financial data may not be indicative of
what the results of operations of Eastern Environmental Services, Inc. would
have been, had the transactions to which such data gives effect had been
completed on the date assumed, nor are such data necessarily indicative of the
results of operations of Eastern Environmental Services, Inc. that may exist in
the future. The following unaudited pro forma information should be read in
conjunction with the notes thereto, the other pro forma financial statements and
notes thereto, and the historical financial statements and notes of Eastern
Environmental Services, Inc. as filed in the Company's annual report filed on
Form 10-K for the three years ended June 30, 1996 and the historical financial
statements of Super Kwik, Inc. and Waste Maintenance Services, Inc. appearing
elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED JUNE 30, 1996.
<TABLE>
<CAPTION>
Allied Super Kwik, Inc.
Eastern Environmental and Waste
Environmental Services, Inc. Maintenance Pro Forma Pro Forma
Services, Inc. and Affiliates Services, Inc. Adjustments Consolidated
-------------- -------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 7,632,503 $ 10,549,739 $20,521,676 $ 0 $ 38,703,918
Cost of revenues 6,857,418 8,211,825 15,393,721 -- 30,462.964
------------- ------------- ----------- ------------- -------------
Gross Profit 775,085 2,337,914 5,127,955 0 8,240,954
Selling, general and ( 137,032 ) (1)
administrative expenses 3,853,145 3,231,358 4,992,880 ( 885,723 ) (2) 11.054.628
------------- ------------- ----------- ------------- -------------
Operating (loss) income ( 3,078,060 ) ( 893,444 ) 135,075 1,022,755 ( 2,813,674 )
Interest expense ( 153,428 ) ( 108,881 ) ( 439,074 ) -- ( 701,383 )
Other (expense) income ( 268,555 ) ( 1,817,733 ) 9,599 1,817.733 (3) ( 258,956 )
------------- ------------- ----------- ------------- -------------
Loss before income taxes
(benefit) ( 3,500,043 ) ( 2,820,058 ) ( 294,400 ) 2,840,488 ( 3,774,013 )
Income taxes (benefit) -- -- ( 12,087 ) -- ( 12,087 )
------------- ------------- ----------- ------------- -------------
Net Loss $( 3,500,043 ) $( 2,820,058 ) $( 282,313 ) $ 2,840,488 $( 3,761,926 )
============= ============= =========== ============= =============
Weighted average number
of shares outstanding (4) 7,996,796
===========
Loss per share $(.47)
======
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED JUNE 30, 1996
1.) To adjust depreciation and amortization expenses for the change in the
basis of property and equipment, net of historical depreciation and
amortization of Allied Environmental Services, Inc. and Affiliates
("Allied") which would have occurred had the purchase of the assets of
Allied been completed July 1, 1995.
2.) To eliminate intercompany administrative charges directly related to cost
sharing arrangements provided by Allied's prior parent which were
terminated as a result of the purchase transaction. Such administrative
services were absorbed by excess capacity of the Company and the Company
has not hired additional employees to perform these administrative
services.
3.) To adjust for the write-off of certain intangible assets of Allied to
reflect the recording of purchase accounting as if the acquisition was
consummated at the beginning of the year whereby the Company would have
assigned a value of zero to this intangible asset.
4.) For the purposes of determining pro forma loss per share, the issuance of
116,667 shares of common stock as consideration for the purchase of assets
of Allied were considered to have been outstanding from July 1, 1995.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED JUNE 30, 1995.
<TABLE>
<CAPTION>
Super Kwik, Inc.
Eastern and Waste
Environmental Maintenance Pro Forma
Services, Inc. Services, Inc. Consolidated
----------------- --------------- --------------
<S> <C> <C> <C>
Revenues $ 8,650,945 $18,865,547 $ 27,516,492
Cost of revenues 7,430,228 14,736,898 22,167,126
------------- ----------- -------------
Gross Profit 1,220,717 4,128,649 5,349,366
Selling, general and
administrative expenses 3,149,863 3,224,249 6,374,112
------------- ----------- -------------
Operating (loss) income ( 1,929,146 ) 904,400 ( 1,024,746 )
Interest expense ( 226,463 ) ( 330,671 ) ( 557,134 )
Other income 365,888 30,227 396,115
------------- ----------- -------------
Loss before income taxes
(benefit) ( 1,789,721 ) 603,956 ( 1,185,765 )
Income taxes (benefit) ( 242,171 ) 62,669 ( 179,502 )
------------- ----------- -------------
Net Loss $( 1,547,550 ) $ 541,287 $( 1,006,263 )
============= =========== =============
Weighted average number
of shares outstanding 6,706,408
===========
Loss per share $(.15)
========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED JUNE 30, 1994.
<TABLE>
<CAPTION>
Super Kwik, Inc.
Eastern and Waste
Environmental Maintenance Pro Forma
Services, Inc. Services, Inc. Consolidated
--------------- -------------- ------------
<S> <C> <C> <C>
Revenues $ 8,480,955 $16,000,394 $24,481,349
Cost of revenues 6,138,295 12,598,739 18,737,034
------------- ----------- -----------
Gross Profit 2,342,660 3,401,655 5,744,315
Selling, general and
administrative expenses 3,442,193 2,864,279 6,306,472
------------- ----------- -----------
Operating (loss) income ( 1,099,533 ) 537,376 ( 562,157 )
Interest expense ( 75,132 ) ( 276,581 ) ( 351,713 )
Other income 155,933 8,071 164,004
------------- ----------- -----------
Loss from continuing
operations before
income taxes (benefit) ( 1,018,732 ) 268,866 ( 749,866 )
Income taxes (benefit) ( 295,759 ) 49,573 ( 246,186 )
------------- ----------- -----------
Net (loss) income from
continuing operations $ ( 722,973 ) $ 219,293 $( 503,680 )
============= =========== ===========
Weighted average number
of shares outstanding 6,698,381
===========
Loss per share $(.08)
======
</TABLE>
<PAGE>
Eastern Environmental Services, Inc.
Pro Forma Consolidated Statement of Operations
Three Months Ended September 30, 1996
(Unaudited)
<TABLE>
<S> <C>
Revenues $ 10,583,977
Cost of revenues 7,993,006
Selling, general and administrative expenses 1,952,001
Merger costs 1,856,340
--------------
Operating loss ( 1,217,370 )
Interest expense ( 147,859 )
Other income 88,269
--------------
Loss before income taxes ( 1,276,960 )
Income tax expense 673,000
--------------
Net loss ( $1,949,960 )
==============
Net loss per share ($.18)
==============
Weighted average number of shares
outstanding 10,849,031
==============
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
The following unaudited pro forma consolidated balance sheet as of June 30,
1996 gives effect to (i) the acquisition of Allied Environmental Services, Inc.
and Affiliates ("Allied") for consideration of approximately $700,000 in Eastern
Environmental Services, Inc. common stock at an assumed fair market value of
$6.00 per share; (ii) the acquisition of Super Kwik, Inc. and Waste Maintenance
Services, Inc. pursuant to the terms of an Agreement of Merger, and (iii) the
completion on August 9, 1996 of the private placement of Eastern Environmental
Services, Inc. ("EESI") stock, providing net proceeds of $9,275,752 after
issuance expense of $724,248. The above transactions are presented as if they
had occurred on June 30, 1996.
The following unaudited pro forma financial data may not be indicative of
what the financial condition of EESI would have been, had the transactions to
which such data gives effect been completed on the date assumed, nor are such
data necessarily indicative of the financial condition of EESI that may exist in
the future. The following unaudited pro forma information should be read in
conjunction with the notes thereto, the other pro forma financial statements and
notes thereto, and the historical financial statements and notes of Eastern
Environmental Services, Inc. as filed in the Company's annual report filed on
Form 10-K for the three years ended June 30, 1996 and the historical financial
statements of Super Kwik, Inc. and Waste Maintenance Services, Inc. appearing
elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
Allied Super Kwik, Inc.
Eastern Environmental and Waste
Environmental Services, Inc. Maintenance Pro Forma Pro Forma
Services, Inc. and Affiliates Services, Inc. Adjustments Combined
---------------- ---------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash
equivalents $ 617,398 $ ( 2,663 ) $ 23,185 $ 9,278,415 (1)(2) $ 9,916,335
Accounts receivable,
net of allowance 1,272,138 2,058,642 1,546,212 ( 783,610 ) (2) 4,093,382
Deferred income taxes 372,445 -- -- -- 372,445
Tax refund receivable 74,467 -- -- -- 74,467
Prepaid expenses and
other current assets 634,548 16,552 555,140 ( 16,552 ) (2) 1,189,688
------------- ------------- ---------- ----------- -----------
Total current assets 2,970,996 2,072,531 2,124,537 8,478,253 15,646,317
Net property and equipment 10,918,566 5,484 5,384,395 ( 484 ) (2) 16,307,961
Assets held for resale 859,262 -- -- -- 859,262
Intangible assets 311,014 -- 723,767 417,884 (2) 1,452,665
Other assets 505,173 127,116 432,902 -- 1,065,191
------------- ------------- ---------- ----------- -----------
Total assets $ 15,565,011 $ 2,205,131 $8,665,601 $ 8,895,653 $35,331,396
============= ============= ========== =========== ===========
Liabilities and
stockholders' equity
Current liabilities:
Short-term borrowings $ -- $ 0 $ 345,000 $ -- $ 345,000
Accounts payable 1,945,343 1,524,541 1,023,151 ( 399,509 ) (2) 4,093,526
Accrued expenses 1,329,579 20,546 369,159 ( 20,546 ) (2) 1,698,738
Income taxes payable 57,739 0 -- 57,739
Current portion of accrued
environmental costs 870,000 0 -- 870,000
Current position of long-
term debt and obligations
under capital leases 325,852 0 1,528,343 1,854,195
------------- ------------- ---------- ----------- -----------
Total current liabilities 4,528,513 1,545,087 3,265,653 ( 420,055 ) 8,919,198
Deferred income taxes 444,797 0 62,826 507,623
Long-term debt and obligations
under capital leases 2,256,816 0 3,410,761 -- 5,667,577
Landfill closure and
accrued environmental
costs 2,088,457 0 -- -- 2,088,457
Stockholders' equity:
Common stock 60,777 11,200 2,100 35,949 (1)(2) 110,026
Additional paid-in
capital 9,020,714 3,071,396 61,484 6,857,207 (1)(2) 19,010,801
Retained earnings
(deficit) ( 2,758,804 ) ( 2,422,552 ) 1,862,777 2,422,552 (2) ( 896,027 )
Less treasury stock at cost -
39,100 common shares ( 76,259 ) 0 -- -- ( 76,259 )
------------- ------------- ---------- ----------- -----------
Total stockholders'
equity 6,246,428 660,044 1,926,361 9,315,708 18,148,541
Total liability and
stockholders' equity $ 15,565,011 $ 2,205,131 $8,665,601 $ 8,895,653 $35,331,396
============= ============= ========== =========== ===========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
1.) To record the receipt of the net proceeds from the offering of common stock
of $10,000,000, net of issuance expenses of $724,248 and exchange of Super
Kwik, Inc. and Waste Maintenance Services, Inc. stock for Eastern
Environmental Services, Inc. common stock.
2.) To record the purchase of Allied Environmental Services, Inc. and
Affiliates for consideration of $700,000 in EESI stock at an assumed fair
market value of $6.00 per share. The excess of the cumulative purchase
price over the cumulative net book value of the assets acquired has been
assigned to goodwill. The assets not acquired and the liabilities not
assumed have been eliminated.
<PAGE>
Eastern Environmental Services, Inc.
Pro Forma Consolidated Balance Sheet
As of September 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,590,920
Accounts receivable, less allowance for
doubtful accounts of $1,426,583 5,517,943
Deferred income taxes 372,445
Tax refund receivable 74,467
Prepaid expenses and other current assets 904,098
--------------
Total current assets 14,459,873
Property and equipment:
Land 1,554,017
Landfill Sites 12,827,791
Buildings and leasehold improvements 1,986,504
Vehicles 8,916,084
Machinery and equipment 6,914,492
Furniture and fixtures 1,423,608
--------------
Total property and equipment 33,622,496
Accumulated depreciation and amortization ( 13,706,450 )
--------------
19,916,046
Assets held for resale 859,262
Excess cost over fair market value of net assets acquired,
net of $465,935 accumulated amortization 2,873,290
Other Intangible assets, net of $3,209,464 accumulated
amortization 687,836
Notes receivable from shareholders/officers 433,577
Other assets, including $433,112 of restricted cash
on deposit for landfill closure and insurance bonding 578,470
--------------
TOTAL ASSETS $ 39,808,354
==============
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 458,000
Current maturities on long-term debt 288,176
Current maturities on capital lease obligations 1,610,748
Accounts payable 4,366,388
Accrued expenses 3,855,498
Income taxes payable 69,080
Current portion of accrued landfill closure
and other environmental costs 870,000
-------------
Total current liabilities 11,517,890
Deferred income taxes 1,176,062
Long-term debt 3,164,955
Capital lease obligations - long-term 3,440,516
Accrued landfill closure and other environmental costs 2,100,526
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 50,000,000
Issued and outstanding shares - 11,567,484 115,675
Additional paid-in capital 21,213,714
Retained earnings (deficit) ( 2,844,725 )
-------------
18,484,664
Less treasury stock at cost -
39,100 common shares ( 76,259 )
-------------
Total stockholders' equity 18,408,405
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $39,808,354
=============
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We hereby consent to the use of our report dated September 30, 1996, relating to
the combined financial statements of Super Kwik, Inc. and Waste Maintenance
Services, Inc., which is contained in Eastern Environmental Services, Inc.'s
Current Report on Form 8-K dated September 27, 1996 (as amended on Form 8-K/A
filed December 9, 1996, June 6, 1997 and July 10, 1997), filed with the
Securities and Exchange Commission.
/s/ Bardall, Weintraub P.C.
Turnersville, New Jersey
July 10, 1997
