<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) March 31, 1997
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
of 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 March 31, 1997, Eastern Environmental Services, Inc., (the Registrant),
consummated the acquisition of Apex Waste Services, Inc. pursuant to the terms
of a Reorganization Plan and Agreement dated March 31, 1997, by and among Robert
A. Kinsley, Scott R. Wagner, Dennis M. Grimm, William J. Holbrook (each
individually a "Shareholder" and collectively the "Shareholders"), Apex Waste
Services, Inc. ("Company") and the Registrant. The description of the
acquisition transaction set forth herein is qualified in its entirety by the
Reorganization Plan and Agreement. The Reorganization Plan and Agreement is
incorporated as Exhibit 10.1.
Pursuant to the Reorganization Plan and Agreement, the Company was acquired
by Eastern Environmental Services, Inc., resulting in the Shareholders receiving
796,927 shares of the Registrant's common stock, $.01 par value, including 2,482
shares ("additional shares") representing an adjustment resulting from long-term
debt being less than $15,000,000 at March 31, 1997, the date of Closing. The
Registrant's common stock was issued in exchange for all issued and outstanding
shares of the Company. The additional shares of the Registrant's common stock
were valued at $12.875 per share (the closing price for the stock on the trading
day which is five trading days prior to the Closing Date), with the remaining
shares valued at $13.00 per share. No cash was paid to the Shareholders for the
acquisition of the shares of the Company. The acquisition is to be accounted
for using the "pooling of interests" method. The Registrant has agreed to
register the stock for resale under the Securities Act of 1933 within 120 days
of the date of closing pursuant to the terms of the Registration Rights included
within the Reorganization Plan and Agreement as Section 6.2 (Registration
Rights.)
At the date of closing, the Reorganization Plan and Agreement, the
Registrant assumed approximately $15,737,000 of outstanding indebtedness of the
Company, which included payment of the Company's $769,000 outstanding revolving
line of credit.
The merger includes all of the assets and liabilities relating to the
operation of the Company. The acquired assets were used by the Shareholders in
the solid waste collection, transfer and disposal business. The Registrant
intends to continue to use the acquired assets for this purpose. In connection
with the acquisition, Dennis Grimm, a Shareholder, was hired by the Registrant
to continue his previous responsibilities of overseeing the Company's
operations.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
(A) COMBINED FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
APEX WASTE SERVICES, INC. AND WASTE MANAGEMENT OF PENNSYLVANIA, INC.,
NORTHEAST PENNSYLVANIA DIVISION (PREDECESSOR COMPANY TO APEX WASTE
SERVICES, INC.)
Independent Auditor's Report
Balance Sheet as of December 31, 1996
Statement of Income and Retained Earnings for the Three Months Ended
December 31, 1996 and the Nine Months Ended September 30, 1996
(Predecessor Company)
Statement of Cash Flows for the Three Months Ended December 31, 1996 and
the Nine Months Ended September 30, 1996 (Predecessor Company)
Notes to Financial Statements
Accountant's Compilation Report
Balance Sheet as of March 31, 1997 (Unaudited)
Statement of Income and Retained Earnings for the Six Months Ended March
31, 1997 and the Three Months Ended September 30, 1996 (Predecessor
Company) (Unaudited)
Statement of Cash Flows for the Six Months Ended March 31, 1997 (Unaudited)
Notes to Financial Statements
WASTE MANAGEMENT OF PENNSYLVANIA, INC., NORTHEAST PENNSYLVANIA DIVISION
(PREDECESSOR COMPANY TO APEX WASTE SERVICES, INC.)
Independent Accountant's Compilation Report
Balance Sheet as of June 30, 1996 (Unaudited)
Statement of Income and Retained Earnings for the twelve months ended
June 30, 1996 (Unaudited)
Statement of Cash Flows for the twelve months ended June 30, 1996
(Unaudited)
Notes to Financial Statements
(B) PRO FORMA FINANCIAL INFORMATION
Pro forma Consolidated Statement of Operations for the year ended
June 30, 1996 (Unaudited)
Pro forma Consolidated Statement of Operations for the nine months ended
March 31, 1997 (Unaudited)
Pro forma Consolidated Balance Sheet as of June 30, 1996 (Unaudited)
Pro forma Consolidated Balance Sheet as of March 31, 1997 (Unaudited)
<PAGE>
(C) EXHIBITS
* 10.1 Reorganization Plan and Agreement dated March 31, 1997, by and among
Robert A. Kinsley, Scott R. Wagner, Dennis M. Grimm, William J. Holbrook
(each individually a "Shareholder" and collectively the "Shareholders"),
Apex Waste Services, Inc. ("Company") and Eastern Environmental Services,
Inc. ("Registrant".)
23.1 Consent of Daniel P. Irwin and Associates, 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: May 14, 1997 By: /s/ Louis D. Paolino, Jr.
------------------------------
Louis D. Paolino, Jr.
President
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED SUMMARY OF OPERATIONS FOR THE YEAR ENDED JUNE
30, 1996 AND NINE MONTHS ENDED MARCH 31, 1997
The following unaudited pro forma consolidated Statements of Operations for
the year ended June 30, 1996 and the nine months ended March 31, 1997 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,
(ii) the acquisition of Super Kwik, Inc. ("Super Kwik") and Waste Maintenance
Services, Inc. ("Maintenance") pursuant to the terms of an Agreement of Merger,
(iii) the acquisition of R & A Bender, Inc. and certain real estate owned by R &
A Bender Property, Ltd ("Bender") for consideration of $16,483,510 in cash and
$1,000,000 in Eastern Environmental Services, Inc. common stock at a fair market
value of $9.375 per share, (iv) the acquisition of Donno Company, Inc., Suffolk
Waste Systems, Inc., and Residential Services and N.R.T. Realty Corp.
(Collectively referred to as "Donno Companies") pursuant to the terms of a
Reorganization Plan and Agreement dated December 31, 1996, and (v) the
acquisition of Apex Waste Services, Inc. pursuant to the terms of a
Reorganization Plan and Agreement dated March 31, 1997. 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 Shareholders of the Donno Companies received 1,137,951 shares
of the Registrant's common stock in exchange for all issued and outstanding
shares of the Donno Companies. The Shareholders of Apex Waste Services, Inc.
received 796,927 shares of the Registrant's common stock in exchange for all
issued and outstanding shares of Apex Waste Services, Inc. The above
transactions are presented as if they had occurred on July 1, 1995. The Super
Kwik and Maintenance, the Donno Companies and the Apex Waste Services, Inc.
business combinations were accounted for using the pooling of interests method,
and as a result, no material pro forma adjustments were deemed necessary to
reflect the results of operations on a consolidated basis for these business
combinations.
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 Apex Waste Services, Inc. appearing elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE
30, 1996
<TABLE>
<CAPTION>
Waste
Management of
Donno Co., Inc., P.A., Inc., NE PA
Suffolk Waste Division
Allied Super Kwik, Inc. R & A Bender, Systems, Inc. and (Predecessor
Eastern Environmental and Waste Inc. and R & A Residential Company to
Environmental Services, Inc. Maintenance Bender Property, Services and Apex Waste
Services, Inc. and Affiliates Services, Inc. Ltd. N.R.T. Corp. Services, Inc.)
---------------- -------------- --------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 7,632,503 $10,549,739 $20,521,676 $8,461,111 $11,364,994 $19,042,380
Cost of revenues 6,857,418 8,211,825 15,393,721 5,812,906 11,166,303 16,115,293
----------- ----------- ----------- ---------- ----------- -----------
Gross Profit 775,085 2,337,914 5,127,955 2,648,205 198,691 2,927,087
Selling, general and
administrative expenses 3,853,145 3,231,358 4,992,880 2,262,009 928,397 2,221,336
----------- ----------- ----------- ---------- ----------- -----------
Operating (loss) income (3,078,060) (893,444) 135,075 386,196 (729,706) 705,751
Interest expense (153,428) (108,881) (439,074) (113,115) (36,507) (746,152)
Other (expense) income (268,555) (1,817,733) 9,599 280,550 128,316 31,365
----------- ----------- ----------- ---------- ----------- -----------
(Loss) income before
income taxes (benefit) (3,500,043) (2,820,058) (294,400) 553,631 (637,897) (9,036)
Income tax (benefit) 0 0 (12,087) 0 2,400 0
----------- ----------- ----------- ---------- ----------- -----------
Net (loss) income $(3,500,043) $(2,820,058) $ (282,313) $ 553,631 $ (640,297) $ (9,036)
=========== =========== =========== ========== =========== ===========
Pro Forma Pro Forma
Adjustments Consolidated
-------------- ----------------
Revenues $ (183,919) (8) $77,388,484
(734,001) (2)
(390,709) (8)
--------------
Cost of revenues (1,124,710) 62,432,756
-------------- -----------
Gross Profit 940,791 14,955,728
(137,032) (1)
172,515 (2)
(785,723) (3)
Selling, general and (955,898) (6)
administrative expenses (9,807) (8)
--------------
(1,715,945) 15,773,180
-------------- -----------
Operating (loss) income 2,656,736 (817,452)
Interest expense (1,168,191) (7) (2,765,348)
Other (expense) income 1,817,733 (4) 181,275
-------------- -----------
(Loss) income before
income taxes (benefit) 3,306,278 (3,401,525)
Income tax (benefit) 0 (9,687)
-------------- -----------
Net (loss) income
$ 3,306,278 $(3,391,838)
============== ===========
Net (loss) income per share $ (0.34)
===========
Weighted avg number of 10,038,341
shares outstanding (5) ===========
</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 adjust depreciation, amortization expense and the provision for closure
and post-closure costs for the change in the basis of property, equipment,
landfill site costs and intangible assets, net of historical depreciation,
amortization, closure and post closure costs of R & A Bender, Inc. and R &
A Bender Property, Ltd. ("Bender") which would have occurred had the
purchase of Bender been completed July 1, 1995.
3.) To eliminate all intercompany administrative expenses and other
intercompany charges that, in the opinion of management, would not have
been necessary to operate Allied as a wholly owned subsidiary of Eastern
Environmental Services, Inc.
4.) To eliminate the loss on the write-off of certain intangible assets of
Allied for which, in the opinion of Allied's management, had no further
benefit.
5.) For the purposes of determining weighted average number of shares out-
standing, the issuance of 116,667, 106,667 and 796,927 shares of common
stock as consideration for the purchase of assets of Allied, the stock of R
& A Bender, Inc. and to reflect the shares issued related to the Apex
Merger respectively, were considered to have been outstanding from July 1,
1995.
6.) To reflect the decrease in Bender's selling, general and administrative
expenses of $955,898 consisting of contractual for the reductions made to
the former owners' salaries of $606,815 and for the termination of Bender's
pension plans of $349,083.
7.) To record additional interest expense of $1,168,191 from amounts
outstanding under the Company's Revolving Credit Facility of $15,818,595
incurred to consummate the acquisition of Bender, net of historical
interest expense of $113,115.
8.) To reflect the elimination of revenues and operating expenses relating to
certain operations of Bender not acquired by EESI.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Waste Mgmt of
PA, Inc., NE
R & A Bender, PA Division
Eastern Inc. and R & A (Predecessor to
Environmental Bender Apex Waste Pro Forma Pro Forma
Services, Inc. Property, Ltd. Services, Inc.) Adjustments Consolidated
----------------- ---------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues $52,409,183 $4,298,280 $4,675,156 $ (41,019) (4) $61,341,600
(196,402) (1)
(206,352) (4)
-------------
Cost of revenues 38,026,625 2,694,590 3,901,842 (402,754) 44,220,303
76,769 (1)
(1,035,367) (2)
(6,085) (4)
Selling, general and -------------
administrative expenses 9,245,947 1,756,647 563,087 (964,683) 10,600,998
Merger costs 3,336,792 (3,336,792) (6) 0
----------------- ---------------- ----------------- ------------- ---------------
Operating income (loss) 1,799,819 (152,957) 210,227 4,663,210 6,520,299
Interest expense (1,525,509) (7,243) (172,534) (529,754) (3) (2,235,040)
Other income 461,089 245,746 3,596 710,431
----------------- ---------------- ----------------- ------------- ---------------
Income before income taxes 735,399 85,546 41,289 4,133,456 4,995,690
160,000 (7)
Income tax expense 940,405 0 0 (904,500) (6) 195,905
----------------- ---------------- ----------------- ------------- ---------------
Net income $ (205,006) $ 85,546 $ 41,289 $ 4,877,956 $ 4,799,785
================= ================ ================= ============= ===============
Net income per shares $0.33
===============
Weighted avg number of
shares outstanding (5) 14,455,605
===============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED MARCH 31, 1997
1.) To adjust depreciation and amortization expense and the provision for
closure and post closure costs for the change in the basis of property,
equipment, landfill site costs and intangible assets, net of historical
depreciation, amortization, closure and post closure costs of R & A Bender,
Inc. and R & A Bender Property, Ltd. ("Bender") which would have occurred
had the purchase of Bender been completed July 1, 1996.
2.) To reflect the decrease in Bender selling, general and administrative
expenses of $1,035,367 consisting of contractual reductions made to the
former owners' salaries of $706,807 and for the termination of Bender's
pension plans of $328,560.
3.) To record additional interest expense of $529,754 resulting to amounts
outstanding under the Company's Revolving Credit Facility of $15,818,595
incurred to consummate the acquisition of Bender, net of historical
interest expense of $38,291.
4.) To reflect the elimination of revenues and operating expenses relating to
certain farming operations of Bender not acquired by EESI.
5.) For the purposes of determining weighted average number of shares out-
standing, the issuance of 106,667 shares of common stock as partial
consideration for the purchase of the stock of R & A Bender, Inc. was
considered to have been outstanding from July 1, 1996.
6.) To eliminate the effect of merger costs relating to the acquisitions of
Super Kwik, Donno and APEX of $3,336,792 and a tax provision of $904,500
relating to the recording of a deferred tax liability with the termination
of Super Kwik, Donno and APEXs' previous S Coroporation status at the date
of the merger.
7.) To record an estimated Federal and State tax provision after utilization of
existing Net Operating Loss carryforwards, and the related reversal of the
previously recorded valuation allowance of $900,000.00.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996 AND MARCH 31, 1997
The following unaudited pro forma consolidated balance sheets as of June 30,
1996 and March 31, 1997 give 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, (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, (iv) the acquisition
of R & A Bender, Inc. and certain real estate owned by R & A Bender Property,
Ltd. ("Bender") for consideration of $16,483,510 in cash and $1,000,000 in
Eastern Environmental Services, Inc. common stock at a fair market value of
$9.375 per share, (v) the acquisition of the Donno Company, Inc., Suffolk Waste
Systems, Inc, and Residential Services and N.R.T. Realty Corp. ("Donno
Companies") pursuant to terms of a Reorganization Plan and Agreement dated
December 31, 1996, and (vi) the acquisition of Apex Waste Services, Inc.
pursuant to the terms of the Reorganization Plan and Agreement dated March 31,
1997. 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 Apex Waste Services, Inc. appearing elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
Donno Co., Inc. and
Allied Suffolk Waste
Eastern Environmental Super Kwik, Inc. and R & A Bender, Inc. Systems, Inc. and
Environmental Services, Inc. Waste Maintenance and R & A Bender Residential Services
Services, Inc. and Affiliates Services, Inc. Property, Ltd. and N.R.T. Corp.
------------------- ---------------- -------------------- ----------------- -----------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 617,398 $ (2,663) $ 23,185 $ 3,674,827 $1,135,529
Accounts receivable,
net of allowance 1,272,138 2,058,642 1,546,212 827,236 530,809
Deferred income taxes 372,445 --- --- --- ---
Tax refund receivable 74,467 --- --- --- ---
Prepaid expenses and
other current assets 634,548 16,552 555,140 253,123 509,065
----------- ----------- ---------- ----------- ----------
TOTAL CURRENT ASSETS 2,970,996 2,072,531 2,124,537 4,755,186 2,175,403
Net property and equipment 10,918,566 5,484 5,384,395 4,915,537 2,040,408
Assets held for resale 859,262 --- --- --- ---
Intangible Assets 311,014 --- 723,767 121,876 ---
Other Assets 505,173 127,116 432,902 348,164 339,664
----------- ----------- ---------- ----------- ----------
TOTAL ASSETS $15,565,011 $ 2,205,131 $8,665,601 $10,140,763 $4,555,475
=========== =========== ========== =========== ==========
Waste Management
of PA, Inc., NE PA
Division
(Predecessor
Company to Apex Pro Forma Pro Forma
Waste Services, Inc.) Adjustments Consolidated
---------------------- ----------- ------------
ASSETS
CURRENT ASSETS
$ 9,275,752 (1)
2,663 (3)
(17,538,550) (4)
15,818,595 (5)
------------
Cash and cash equivalents $ 30,289 $ 7,558,460 $13,037,025
(783,610) (3)
211,782 (4)
Accounts receivable, ------------
net of allowance 1,570,939 (571,828) 7,234,148
Deferred income taxes --- --- 372,445
Tax refund receivable --- --- 74,467
(16,552) (3)
282,424 (4)
Prepaid expenses and ------------
other current assets 281,160 265,872 2,515,460
----------- ------------ -----------
TOTAL CURRENT ASSETS 1,882,388 7,252,504 23,233,545
(484) (3)
13,229,325 (4)
------------
Net property and equipment 9,422,843 13,228,841 45,916,074
Assets held for resale --- 64,300 (4) 923,562
417,884 (3)
6,805,049 (4)
------------
Intangible Assets 8,276,430 7,222,933 16,656,020
Other Assets 1,264 (348,164) (4) 1,406,119
----------- ------------ -----------
TOTAL ASSETS $19,582,925 $ 27,420,414 $88,135,320
=========== ============ ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Donno Co., Inc. and
Allied Suffolk Waste
Eastern Environmental Super Kwik, Inc. and R & A Bender, Inc. Systems, Inc. and
Environmental Services, Inc. Waste Maintenance and R & A Bender Residential Services
Services, Inc. and Affiliates Services, Inc. Property, Ltd. and N.R.T. Corp.
------------------- ---------------- -------------------- ----------------- -----------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUTIY
CURRENT LIABILITIES
Short-term borrowings $ --- $ --- $ 345,000 $ --- $ 250,000
Accounts payable 1,945,343 1,524,541 1,023,151 247,988 590,637
Accrued expenses 1,329,579 20,546 369,159 562,358 329,621
Income taxes payable 57,739 --- --- --- ---
Current portion of accrued
environmental costs 870,000 --- --- --- ---
Current portion of long-
term debt and obligations
under capital leases 325,852 --- 1,528,343 1,067,461 159,865
------------- -------------- --------------- -------------- -------------
Total current liabilities 4,528,513 1,545,087 3,265,653 1,877,807 1,330,123
Deferred income taxes 444,797 --- 62,826 --- ---
Long-term debt and
obligations 2,256,816 --- 3,410,761 65,814 641,263
Landfill closure and accrued
environmental costs 2,088,457 --- --- 3,587,001 335,680
Waste Management
of PA, Inc., NE PA
Division
(Predecessor
Company to Apex Pro Forma Pro Forma
Waste Services, Inc.) Adjustments Consolidated
---------------------- ----------- ------------
LIABILITIES AND STOCKHOLDERS'
EQUTIY
CURRENT LIABILITIES
Short-term borrowings $ --- $ 690,080 (4) $ 1,285,080
(399,509) (3)
225,839 (4)
----------
Accounts payable 321,139 (173,670) 5,479,129
1,856,000 (2)
(20,546) (3)
2,943,448 (4)
800,000 (6)
1,234,278 (7)
----------
Accrued expenses 1,231,449 6,813,180 10,655,892
Income taxes payable --- --- 57,739
Current portion of accrued
environmental costs --- 200,000 (4) 1,070,000
Current portion of long-
term debt and obligations
under capital leases 150,500 (681,099) (4) 2,550,922
----------- ---------- -----------
Total current liabilities 1,703,088 6,848,491 21,098,762
660,000 (2)
972,000 (4)
7,500 (6)
237,000 (7)
----------
Deferred income taxes --- 1,876,500 2,384,123
Long-term debt and
obligations 187,500 15,871,635 (4) 22,433,789
Landfill closure and accrued
environmental costs --- 1,912,999 (4) 7,924,137
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Donno Co., Inc. and
Suffolk Waste
Eastern Allied Super Kwik, Inc. and R & A Bender, Inc. Systems, Inc. and
Environmental Environmental Waste Maintenance and R & A Bender Residential Services
Services, Inc. Services, Inc. Services, Inc. Property, Ltd. and N.R.T. Corp.
------------------- ---------------- -------------------- ----------------- -----------------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY
Common stock 60,777 11,200 2,100 21,000 1,278,901
Additional paid-in capital 9,020,714 3,071,396 61,484 19,000 332,689
Retained Earnings (deficit) (2,758,804) (2,422,552) 1,862,777 4,570,141 636,819
Less treasury stock at cost-
39,100 common shares (76,259) --- --- --- ---
------------ ------------ ------------ ------------ ------------
Total stockholders' equity 6,246,428 660,044 1,926,361 4,610,141 2,248,409
------------ ------------ ------------ ------------ ------------
Total liability and
stockholders' equity $ 15,565,011 $ 2,205,131 $ 8,665,601 $ 10,140,763 $ 4,555,475
============ ============ ============ ============ ============
Waste Management
of PA, Inc., NE PA
Division
(Predecessor
Company to Apex Pro Forma Pro Forma
Waste Services, Inc.) Adjustments Consolidated
---------------------- ----------- ------------
STOCKHOLDERS' EQUITY
(1,231.070) (1)
(10,033) (3)
(19,933) (4)
------------
Common stock 17,500 (1,261,036) 130,442
10,506,822 (1)
(2,372,563) (3)
979,933 (4)
------------
Additional paid-in capital 17,981,327 9,114,192 39,600,802
(2,516,000) (2)
2,422,552 (3)
(4,570,141) (4)
(807,500) (6)
(1,471,278) (7)
------------
Retained Earnings (deficit) (306,490) (6,942,367) (5,360,476)
Less treasury stock at cost-
39,100 common shares --- --- (76,259)
------------ ------------ ------------
Total stockholders' equity 17,692,337 910,789 34,294,509
------------ ------------ ------------
Total liability and
stockholders' equity $ 19,582,925 $ 27,420,414 $ 88,135,320
============ ============ ============
</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 isuance expenses of $724,248, and to record the
exchange of Super Kwik, Inc. and Waste Maintenance Services, Inc. stock, the
stock of the Donno Company, Inc., Suffolk Waste Systems, Inc. and
Residential Services, Inc. and N.R.T. Realty Corporation, and the stock of
Apex Waste Services, Inc. for Eastern Environmental Services, Inc. common
stock.
2.) To record the effect of merger costs relating to the acquisition of Super
Kwik and Maintenance of $1,856,000 and a tax provision of $660,000 relating
to the recording of a deferred tax liability with the termination of Super
Kwik's and Maintenance's previous S Corporation status at the date of the
merger.
3.) 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.
4.) To record the purchase of the stock of R & A Bender, Inc. and certain real
estate owned by R & A Bender Property, Ltd for consideration of $1,000,000
in EESI stock at an assumed fair market value of $9.375 per share and
$16,483,510 in cash. 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.
5.) To record borrowings under EESI's Revolving Credit Facility of $15,818,595
necessary to effect the acquisition of R & A Bender, Inc. and certain real
estate owned by R & A Bender Property, Ltd.
6.) To record the effect of merger costs relating to the acquisition of Donno
Company, Inc., Suffolk Waste Systems, Inc. and Residential Services and
N.R.T. Realty Corp. of $800,000 and a tax provision of $7,500 relating to
the recording of a net deferred tax liability with the termination of the
Donno Companies' previous "S" Corporation status at the date of the merger.
7.) To record the effect of merger costs relating to the acquisition of Apex
Waste Services, Inc. of $1,234,278 and a tax provision of $237,000 relating
to the recording of a net deferred tax liability with the termination of
Apex's previous "S" corporation status at the date of the merger.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
EASTERN
ENVIRONMENTAL
SERVICES, INC.
--------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,906,902
Accounts receivable, net of allowance 7,694,765
Deferred income taxes 1,568,000
Tax refund receivable --
Prepaid expenses and other current assets 2,173,656
------------
TOTAL CURRENT ASSETS 15,343,323
PROPERTY, PLANT AND EQUIPMENT
Land 4,166,178
Landfill sites 30,571,790
Buildings and leasehold improvements 6,441,336
Vehicles 15,623,804
Machinery and equipment 15,098,307
Furniture and fixtures 1,390,761
------------
73,292,176
Accumulated depreciation (19,120,447)
------------
Net property, plant and equipment 54,171,729
Assets held for resale 395,059
Excess cost over fair market value of assets 15,764,939
Intangible assets, net of accumulated amortization 1,720,740
Notes receivable from shareholders / officers 463,902
Other assets 1,493,005
------------
TOTAL ASSETS $ 89,352,697
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 0
Current maturities on long-term debt 1,285,312
Current portion of long-term debt and obligations
under capital leases 1,445,100
Accounts payable 3,835,667
Accrued expenses and other current liabilities 8,361,616
Income taxes payable 45,880
Current portion of accrued environmental costs 1,070,000
------------
TOTAL CURRENT LIABILITIES 16,043,575
Deferred income taxes 3,832,203
Long-term debt 31,736,086
Capital lease obligations - long-term 2,244,432
Accrued landfill closure and other environmental costs 8,172,364
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 140,958
Additional paid-in capital 27,927,552
Retained earnings (deficit) (668,214)
Less treasury stock at cost - 39,100 common shares (76,259)
------------
TOTAL STOCKHOLDERS' EQUITY 27,324,037
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,352,697
============
</TABLE>
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA, INC.
NORTHEAST PENNSYLVANIA DIVISION
JUNE 30, 1996
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA
NORTHEAST PENNSYLVANIA DIVISION
FINANCIAL STATEMENTS
PERIOD JULY 1, 1995 TO JUNE 30, 1996
TABLE OF CONTENTS
PAGE NO.
--------
ACCOUNTANT'S COMPILATION REPORT 1
FINANCIAL STATEMENTS:
BALANCE SHEET 2
STATEMENT OF INCOME AND RETAINED EARNINGS 3
STATEMENT OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
[Letterhead of Daniel P. Irwin appears here]
To The Board of Directors
Waste Management of Pennsylvania, Inc.
Northeast Pennsylvania Division
We have compiled the accompanying Balance Sheet of Waste Management of
Pennsylvania, Inc., Northeast Pennsylvania Division, as of June 30, 1996, and
the related Statements of Income, Retained Earnings, and Cash Flows for the
twelve months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting, in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/s/ DANIEL P. IRWIN AND ASSOCIATES P.C.
Strafford-Wayne, Pennsylvania
April 21, 1997
-1-
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA, INC.
NORTHEAST PENNSYLVANIA DIVISION
BALANCE SHEET
JUNE 30, 1996
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents 30,289
Accounts Receivable - Trade (NET) 1,570,939
Other Receivables 27,458
Inventory 2,618
Prepaid Expenses 251,084
----------
TOTAL CURRENT ASSETS 1,882,388
PROPERTY AND EQUIPMENT:
Property and Equipment 20,054,974
LESS: Accumulated Depreciation (10,632,131)
----------
NET PROPERTY AND EQUIPMENT 9,422,843
INTANGIBLE ASSETS:
Goodwill - NET 7,832,264
Covenant - NET 444,166
----------
TOTAL INTANGIBLE ASSETS 8,276,430
OTHER ASSETS:
Deposits - Long Term 1,264
----------
TOTAL ASSETS 19,582,925
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 150,500
Accounts Payable - Trade 321,139
Accrued Payroll and Payroll Taxes 40,872
Accrued Income Tax 92,978
Other Accrued Expense 120,927
Deferred Income 44,282
Advances From Affiliates 932,390
----------
TOTAL CURRENT LIABILITIES 1,703,088
LONG-TERM DEBT, Less Current Maturities 187,500
----------
TOTAL LIABILITIES 1,890,588
STOCKHOLDERS' EQUITY
Common Stock 17,500
Paid in Capital 17,981,327
Retained Earnings (306,490)
----------
TOTAL STOCKHOLDERS' EQUITY 17,692,337
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 19,582,925
==========
SEE ACCOUNTANT'S COMPILATION REPORT
-2-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA, INC.
NORTHEAST PENNSYLVANIA DIVISION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
SALES REVENUE 19,042,380
Cost of Sales 16,115,293
----------
GROSS PROFIT 2,927,087
General and Administrative Expenses 2,221,336
----------
INCOME FROM OPERATIONS 705,751
Other Income (Expense):
Other Income 367
Interest Expense (746,152) (745,785)
---------
GAIN ON SALE OF PROPERTY AND EQUIPMENT 30,998
----------
NET LOSS (9,036)
Retained Earnings - Beginning of Year (297,454)
----------
Retained Earnings - End of Year (306,490)
==========
SEE ACCOUNTANT'S COMPILATION REPORT
-3-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA, INC.
NORTHEAST PENNSYLVANIA DIVISION
STATEMENT OF CASH FLOWS
JUNE 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (LOSS) (9,036)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 2,192,584
Amortization 566,254
(Increase) Decrease in:
Receivables 665,429
Inventory 1,893
Prepaid Expenses 77,849
Deferred Cost 195,053
Increase (Decrease) in:
Accounts Payable (284,443)
Accrued Payroll and Payroll Taxes (67,937)
Accrued Income Tax (317,793)
Other Accrued Liabilities (379,114)
Deferred Income 3,951
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,644,690
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (1,827,037)
Purchase of Goodwill (196,336)
Purchase of Covenants (267,300)
----------
NET CASH (USED) IN INVESTING ACTIVITIES (2,290,673)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Short-Term Borrowings (132,200)
Repayment of Long-Term Borrowings (107,700)
Repayment of Advances from Affiliates (94,171)
----------
NET CASH USED BY FINANCIAL ACTIVITIES (334,071)
INCREASE IN CASH AND CASH EQUIVALENTS 19,946
Cash and Cash Equivalents
Beginning 10,343
----------
Ending 30,289
==========
SEE ACCOUNTANT'S COMPILATION REPORT
-4-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA, INC.
NORTHEAST PENNSYLVANIA DIVISION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
Waste Management of Pennsylvania - Northeast Pennsylvania Division (The
"Company") is engaged in the business of solid waste collection for
commercial, municipal, and residential customers located primarily in
Northeastern Pennsylvania.
Depreciation
Depreciation is computed using the straight-line method for financial
reporting purposes.
Amortization of Goodwill
Cost of investments in purchased companies in excess of the underlying
fair value of net assets at dates of acquisition are recorded as
goodwill and amortized over 10-40 years on a straight-line basis.
Allowance for Uncollectible Accounts
The Company uses the Allowance Method to account for uncollectible
accounts receivable. The Allowance for doubtful accounts is based on
management's analysis of possible bad debts. Bad debt recoveries are
charged against the allowance account as realized.
NOTE 2 PROPERTY AND EQUIPMENT:
Property, plant, and equipment are stated at cost. Depreciation is
computed using the straight line method for financial reporting purposes
and amounted to $2,192,584.00 for the twelve months ended June 30, 1996.
Property and equipment are summarized by major classifications as
follows:
Land $ 540,698
Buildings and Improvements 2,494,264
Machinery and Equipment 8,077,621
Vehicles 8,154,875
Furniture and Fixtures 787,516
------------
20,054,974
LESS: Accumulated Depreciation (10,632,131)
------------
9,422,843
============
-5-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
WASTE MANAGEMENT OF PENNSYLVANIA, INC.
NORTHEAST PENNSYLVANIA DIVISION
NOTES TO FINANCIAL STATEMENTS
NOTE 3 RELATED PARTY TRANSACTIONS:
Note payable to Related Parties as of June 30, 1996, consisted of
$932,390.00 due to WMX Technologies, Inc. (Parent Company). Interest
expense paid to WMX Technologies, Inc. for the twelve months ended June
30, 1996 was $746,152.00.
The Company received a number of management services from its Parent
Company. Charges for these services were $402,700.00 during the year
ended June 30, 1996.
NOTE 4 SUBSEQUENT EVENT:
On October 1, 1996, Apex Waste Services, Inc., a Pennsylvania
Corporation, purchased all of the assets of Waste Management of
Pennsylvania, Inc. -Northeast Pennsylvania Division for $18,577,257.20.
-6-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC. AND WASTE MANAGEMENT
OF PENNSYLVANIA INC., NORTHEAST PENNSYLVANIA
DIVISION (PREDECESSOR COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1996
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1996
TABLE OF CONTENTS
PAGE NO.
--------
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
BALANCE SHEET 2
STATEMENTS OF INCOME AND RETAINED EARNINGS 3
STATEMENT OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5 - 10
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
[LETTERHEAD OF DANIEL P. IRWIN APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Apex Waste Services, Inc.
13 Peggy Parkway
Dunmore, Pennsylvania 18512
We have audited the accompanying Balance Sheet of Apex Waste Services, Inc. as
of December 31, 1996, the Statement of Income, Retained Earnings and Cash Flows
of Apex Waste Services, Inc. for the three month period ended December 31, 1996
and the Statement of Income, Retained Earnings and Cash Flows for the nine
months ended September 30, 1996 for Waste Management of Pennsylvania, Inc.,
Northeast Pennsylvania Division. 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 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 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 audit provides 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 Apex Waste Services, Inc. as of
December 31, 1996 and the results of its operations and cash flows for the three
month period then ended and the results of operations and cash flows of Waste
Management of Pennsylvania, Inc., Northeast Pennsylvania Division, for the nine
months ended September 30, 1996 in conformity with generally accepted accounting
principles.
/s/ DANIEL P. IRWIN AND ASSOCIATES P.C.
Strafford-Wayne, Pennsylvania
April 30, 1997
-1-
<PAGE>
APEX WASTE SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents 134,175
Accounts Receivable - Trade LESS
Allowance of $90,000.00 2,194,448
Other Receivables 25,451
Prepaid Expenses 172,143
Receivable - Stockholders 31,000
---------
TOTAL CURRENT ASSETS 2,557,217
PROPERTY AND EQUIPMENT:
Property and Equipment 12,453,388
LESS: Accumulated Depreciation (354,145)
----------
NET PROPERTY AND EQUIPMENT 12,099,243
INTANGIBLE ASSETS:
Goodwill - NET 6,118,807
Other Intangible - NET 725,000
Loan Origination Fees - NET 86,668
----------
TOTAL INTANGIBLE ASSETS 6,930,475
----------
TOTAL ASSETS 21,586,935
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note Payable - Bank 434,436
Current Maturities of Long Term Debt 2,000,000
Accounts Payable - Trade 757,599
Deferred Revenue 995,005
Accrued Payroll & Payroll Taxes 235,416
Other Accrued Liabilities 314,442
----------
TOTAL CURRENT LIABILITIES 4,736,898
LONG-TERM DEBT, LESS Current Maturities 13,468,045
----------
TOTAL LIABILITIES 18,204,943
STOCKHOLDERS' EQUITY:
Common Stock - No Par Value; Authorized
1,000,000 Shares; Issued and Outstanding
100,000 Shares 3,250,000
Retained Earnings 131,992
----------
TOTAL STOCKHOLDERS' EQUITY 3,381,992
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 21,586,935
==========
SEE NOTES TO FINANCIAL STATEMENTS.
-2-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
WASTE
MANAGEMENT APEX
---------- --------
01-01-96 10-01-96
TO TO
09-30-96 12-31-96
---------- --------
SALES 14,025,179 4,375,659
COST OF SALES 11,961,736 3,091,309
GENERAL AND ADMINISTRATIVE EXPENSES 1,723,700 807,086
---------- ---------
INCOME FROM OPERATIONS 339,743 477,264
Other Income (Expenses):
Other Income 4,136 3,730
Interest Expense (532,095) (349,002)
--------- ---------
NET INCOME OR (LOSS) (188,216) 131,992
Retained Earnings - Beginning of Period (76,985) NONE
---------- ---------
Retained Earnings - End of Period (265,201) 131,992
========= =========
SEE NOTES TO FINANCIAL STATEMENTS.
-3-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
WASTE
MANAGEMENT APEX
---------- --------
01-01-96 10-01-96
TO TO
09-30-96 12-31-96
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (188,216) 131,992
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 1,607,862 354,145
Amortization 429,774 69,788
(Increase) Decrease in:
Receivables 137,186 (2,194,448)
Other Receivables 35,503 (25,451)
Prepaid Expenses 352,903 (172,143)
Increase (Decrease) in:
Accounts Payable 131,513 757,599
Accrued Payroll and Payroll Taxes 111,148 235,416
Other Accrued Liabilities 577,447 314,442
Deferred Income (87,259) 995,005
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,107,861 466,345
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (12,453,388)
Payments for Costs Over Assets Acquired (6,157,290)
Purchase of Other Intangible Assets (750,000)
Purchase of Loan Origination Fees (92,973)
Sale of Property and Equipment 8,214,689
Sale of Goodwill and Other Intangibles 7,780,626
----------- ------------
NET CASH (USED) IN INVESTING ACTIVITIES 15,995,315 (19,453,651)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Issuance of Common Stock 3,250,000
Proceeds From Short Term Borrowings 434,436
Proceeds From Long Term Borrowings 14,000,000
Repayment of Long Term Borrowings (194,900) (531,955)
Loans From Shareholders 2,000,000
Due From Shareholders (31,000)
Disbursements to Affiliates (18,878,999)
----------- ------------
NET CASH PROVIDED BY FINANCIAL ACTIVITIES (19,073,899) 19,121,481
----------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS 29,277 134,175
Cash and Cash Equivalents:
Beginning 7,090 NONE
----------- ------------
Ending 36,367 134,175
=========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
-4-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 NATURE OF BUSINESS:
Apex Waste Services, Inc., (The Company) began business on October 1,
1996 when they acquired substantially all the Assets of Waste Management
of Pennsylvania, Inc., Northeast Pennsylvania Division, a solid waste
collection business. The total cost of the acquisition was
$18,577,257.00 which exceeded the fair market value of the net assets of
Waste Management, Inc., Northeast Pennsylvania Division by
$6,157,290.09. The excess is being amortized on the straight line method
over forty (40) years. The Company is engaged in solid waste collection
for commercial, municipal and residential customers located primarily in
Northeastern Pennsylvania.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents:
For the purposes of the Statement of Cash Flows, the Company considers
all highly liquid debt instruments purchased with maturities of less
then three months to be cash equivalents.
Property and Plant Depreciation:
Property and Equipment are capitalized and stated at cost. Depreciation
is computed using the straight-line basis over the estimated service
lives of the respective classes of property.
Allowance for Uncollectible Accounts:
The Company uses the Allowance Method to account for uncollectible
accounts receivable. The Allowance for doubtful accounts is based on
management's analysis of possible bad debts. Bad debt recoveries are
charged against the allowance account as realized.
Intangible Assets
Intangible Assets consist primarily of the cost of purchasing the
company in excess of market value of net assets acquired ("Goodwill")
and organization costs. The Goodwill is being amortized on a straight
line basis over a period of forty (40) years. All other intangible
assets are being amortized over five (5) to ten (10) years on a straight
line basis.
Use of 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 the assets and
liabilities, income and expenses and disclosure of contingencies. Actual
results could differ from those results.
-5-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Revenue Recognition:
The Company derives it Revenues primarily from long term contracts with
municipalities and long and short term contracts with commercial
enterprises. Services are also provided to certain residential customers
with whom no contracts exist. Revenue is recognized from each of these
sources as performance occurs. Revenues billed in advance of periods
earned are reflected as deferred revenue in the accompanying balance
sheet.
"S" Corporation
The Company and its Stockholders have elected to be taxed as an "S"
Corporation for both Federal and State income tax purposes. Generally,
under this election, any Federal and State taxable income of the Company
is included in the personal income tax returns of the stockholders.
Consequently, no provision for Federal and State income taxes has been
recorded in the accompanying financial statements.
NOTE 3 OTHER RECEIVABLES:
Other Receivables consist of short term advances to employees to cover
pension plan loans. These loans will be repaid by employees upon the
company instituting its new 401K pension plan. The Balance at December
31, 1996 was $25,451.00.
NOTE 4 RELATED PARTY TRANSACTIONS:
Note Payable
The Company has two notes payable to the Company's Stockholders as
detailed in Note #10.
NOTE 5 PREPAID EXPENSES:
Prepaid Expenses consist of the following at December 31, 1996:
Insurance 104,487.00
PA. Registration Fees 33,273.00
Real Estate Taxes 13,126.00
Other 21,257.00
----------
172,143.00
==========
-6-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1996 is summarized as follows:
Machinery and Equipment 4,606,588
Autos and Trucks 2,589,382
Buildings and Site Improvements 2,797,411
Land 2,100,000
Office Equipment 360,007
----------
12,453,388
LESS: Accumulated Depreciation (354,145)
----------
NET PROPERTY AND EQUIPMENT 12,099,243
==========
NOTE 7 INTANGIBLE ASSETS:
A summary of Intangible Assets and Accumulated Amortization at December
31, 1996 is as follows:
ACCUMULATED NET BOOK
ASSET COST AMORTIZATION VALUE
----- --------- ------------ ---------
Goodwill 6,157,290 38,483 6,118,807
Other Intangibles _ NET 750,000 25,000 725,000
Loan Origination Fee 92,973 6,305 86,668
--------- ------ ---------
7,000,263 69,788 6,930,475
========= ====== =========
NOTE 8 OTHER ACCRUED LIABILITIES:
The Company's Other Accrued Liabilities at December 31, 1996 consist of
the following:
Health Insurance Claims 30,983.00
Corporate Taxes 17,312.00
Sales Taxes 2,409.00
Accrued Capital Costs 254,453.00
Other Accrued Liabilities 9,285.00
----------
314,442.00
==========
-7-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 9 NOTE PAYABLE - BANK
At December 31, 1996, the Company had outstanding borrowings of
$434,436.00 pursuant to a $1,500,000.00 line of credit facility with
Dauphin Deposit Bank which matures April 30, 1997. Interest is payable
monthly at the Bank's fluctuating base rate plus .25% (8.5% at December
31, 1996). The note is secured by substantially all assets of the
company, all shares of outstanding stock of the company, and the
personal guarantee of individual shareholders in the amount of
$3,000,000.00.
NOTE 10 LONG-TERM DEBT:
Long-term debt at December 31, 1996 is summarized as follows:
Dauphin Deposit Bank
Acquisition term loan, payable in monthly installments of $166,667.00
plus interest at 8.5% until September 1999 and at the bank's base rate
plus .5%, thereafter. The loan matures September 2003. The note is
secured by substantially all assets of the company, all shares of
outstanding stock of the company, and the personal guarantees of
individual shareholders in the amount of $3,000,000.00.
13,468,045
Note Payable - Stockholder
Note payable with interest at 8.5% until September 1999 and at an amount
equal to Dauphin Deposit Bank's base rate plus .5%, thereafter. The loan
matures September 2003. The loan is subordinate to the Dauphin Deposit
Bank Loan.
1,000,000
Note Payable - Stockholder
Note payable with interest at 8.5% until September 1999 and at an amount
equal to Dauphin Deposit Bank's base rate plus .5%, thereafter. The loan
matures September 2003. The loan is subordinate to the Dauphin Deposit
Bank Loan.
1,000,000
----------
15,468,045
LESS: Current Maturities 2,000,000
----------
TOTAL LONG-TERM DEBT 13,468,045
==========
-8-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 10 LONG-TERM DEBT (continued)
Note Payable - Stockholder (cont'd)
Aggregate maturities required on long-term debt at December 31, 1996 is
as follows:
Years Ending
December 31,
------------
1997 2,000,000
1998 2,000,000
1999 2,000,000
2000 2,000,000
2001 2,000,000
THEREAFTER 5,468,045
----------
TOTAL 15,468,045
==========
-9-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
SUBSEQUENT EVENTS
CORPORATE OWNERSHIP:
On March 31, 1997, Apex Waste Services, Inc. entered into an agreement with
Eastern Environmental Services, Inc. to exchange common stock which resulted in
Apex Waste Services, Inc. becoming a wholly owned subsidiary of Eastern
Environmental Services, Inc.
FINANCING ARRANGEMENTS:
On March 31, 1997, Eastern Environmental Services, Inc. advanced $15,737,099.00
to Apex Waste Services, Inc. by paying off certain bank debt of Apex Waste
Services, Inc.
-10-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
FINANCIAL STATEMENTS
PERIOD JULY 1, 1996 TO
MARCH 31, 1997
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
FINANCIAL STATEMENTS
PERIOD JULY 1, 1996 TO MARCH 31, 1997
TABLE OF CONTENTS
PAGE NO.
--------
ACCOUNTANT'S COMPILATION REPORT 1
FINANCIAL STATEMENTS:
BALANCE SHEET 2
STATEMENT OF INCOME AND RETAINED EARNINGS 3
STATEMENT OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5 - 7
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
[LETTERHEAD OF DANIEL P. IRWIN APPEARS HERE]
ACCOUNTANT'S COMPILATION REPORT
To The Board of Directors
Apex Waste Services, Inc.
13 Peggy Parkway
Dunmore, Pennsylvania 18512
We have compiled the accompanying Balance Sheet of Apex Waste Services, Inc. as
of March 31, 1997, and the related Statements of Income, Retained Earnings, and
Cash Flows for the six month period then ended. We have also compiled the
Statement of Income for the three month period ended September 30, 1996 and the
nine month period ended March 31, 1997 in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting, in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/s/ DANIEL P. IRWIN AND ASSOCIATES P.C.
Strafford-Wayne, Pennsylvania
April 22, 1997
-1-
<PAGE>
APEX WASTE SERVICES, INC.
BALANCE SHEET
MARCH 31, 1997
ASSETS
CURRENT ASSETS:
Cash 846,810
Accounts Receivable - Trade (NET) 1,948,658
Other Receivables 27,296
Prepaid Expenses 80,357
Inventory 18,219
Due From Shareholders 31,000
----------
TOTAL CURRENT ASSETS 2,952,340
PROPERTY AND EQUIPMENT:
Property and Equipment 12,538,708
LESS: Accumulated Depreciation (710,975)
----------
NET PROPERTY AND EQUIPMENT 11,827,733
INTANGIBLE ASSETS:
Other Intangibles - NET 700,000
Goodwill - NET 6,080,324
----------
TOTAL INTANGIBLE ASSETS 6,780,324
----------
TOTAL ASSETS 21,560,397
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable - Trade 628,675
Accrued Payroll & Payroll Taxes 264,382
Accrued Liabilities 1,351,973
Deferred Revenue 941,806
----------
TOTAL CURRENT LIABILITIES 3,186,836
LONG-TERM DEBT:
Loans Payable - Eastern Environmental Services, Inc. 15,791,509
----------
TOTAL LIABILITIES 18,978,345
STOCKHOLDERS' EQUITY:
Common Stock 3,250,000
Retained Earnings (667,948)
----------
TOTAL STOCKHOLDERS' EQUITY 2,582,052
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 21,560,397
==========
SEE NOTES TO FINANCIAL STATEMENTS AND ACCOUNTANT'S COMPILATION REPORT.
-2-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED MARCH 31, 1997
WASTE
MANAGEMENT APEX
-------------- ------------
07/01/96 TO 10/01/96 TO
-------------- -------------
09/30/96 03/31/97
-------------- -------------
SALES 4,675,156 8,708,600
COST OF SALES 3,901,842 6,088,028
MERGER COSTS NONE 1,234,278
GENERAL AND ADMINISTRATIVE EXPENSES 563,087 1,389,300
---------- ----------
INCOME FROM OPERATIONS 210,227 (3,006)
Other Income (Expenses):
Other Income 3,596 15,623
Interest Expense (172,534) (680,565)
---------- ----------
NET INCOME OR (LOSS) 41,289 (667,948)
Retained Earnings - Beginning of Period (306,490) NONE
---------- ----------
Retained Earnings - End of Period (265,201) (667,948)
========== ==========
SEE NOTES TO FINANCIAL STATEMENTS AND ACCOUNTANT'S COMPILATION REPORT.
-3-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (LOSS) (667,948)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 710,975
Amortization 126,966
(Increase) Decrease in:
Other Receivables (27,296)
Receivables (1,948,658)
Prepaid Expenses (80,357)
Inventory (18,219)
Increase (Decrease) in:
Accounts Payable 628,675
Accrued Payroll and Payroll Taxes 264,382
Other Accrued Liabilities 1,351,973
Deferred Income 941,806
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,282,299
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (12,538,708)
Purchase of Goodwill/Other Intangibles (6,907,290)
NET CASH (USED) IN INVESTING ACTIVITIES (19,445,998)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 3,250,000
Long-Term Borrowings - EESI 15,791,509
Due From Shareholders (31,000)
-----------
NET CASH PROVIDED BY FINANCIAL ACTIVITIES 19,010,509
INCREASE IN CASH AND CASH EQUIVALENTS 846,810
Cash and Cash Equivalents:
Beginning NONE
-----------
Ending 846,810
===========
SEE NOTES TO FINANCIAL STATEMENTS AND ACCOUNTANT'S COMPILATION REPORT.
-4-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 1997
NOTE 1 NATURE OF BUSINESS:
Apex Waste Services, Inc., (The Company) began business on October 1,
1996 when they acquired substantially all the Assets of Waste Management
of Pennsylvania, Inc., Northeast Pennsylvania Division, a solid waste
collection business. The total cost of the acquisition was
$18,577,257.00 which exceeded the fair market value of the net assets of
Waste Management, Inc., Northeast Pennsylvania Division by
$6,157,290.09. The excess is being amortized on the straight line method
over forty (40) years. The Company is engaged in solid waste collection
for commercial, municipal and residential customers located primarily in
Northeastern Pennsylvania.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Property and Plant Depreciation:
Property and Equipment are capitalized and stated at cost. Depreciation
is computed using the straight-line basis over the estimated service
lives of the respective classes of property.
Allowance for Uncollectible Accounts:
The Company uses the Allowance Method to account for uncollectible
accounts receivable. The Allowance for doubtful accounts is based on
management's analysis of possible bad debts. Bad debt recoveries are
charged against the allowance account as realized.
Intangible Assets
Intangible Assets consist primarily of the cost of purchasing the
company in excess of market value of net assets acquired ("Goodwill")
and organization costs. The Goodwill is being amortized on a straight
line basis over a period of forty (40) years. All other intangible
assets are being amortized over five (5) to ten (10) years on a straight
line basis.
"S" Corporation
The Company and its Stockholders have elected to be taxed as an "S"
Corporation for both Federal and State income tax purposes. Generally,
under this election, any Federal and State taxable income of the Company
is included in the personal income tax returns of the stockholders.
Consequently, no provision for Federal and State income taxes has been
recorded in the accompanying financial statements.
-5-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 1997
NOTE 3 OTHER RECEIVABLES:
Other Receivables consist of short term advances to employees to cover
pension plan loans. These loans will be repaid by employees upon the
company instituting its new 401K pension plan. The Balance at March 31,
1997, was $27,296.00.
NOTE 4 PREPAID EXPENSES:
Prepaid Expenses consist of the following at March 31, 1997.
Performance Bonds 6,440.00
Vehicle Registrations 22,284.00
Real Estate Taxes 26,646.00
Other 24,987.00
----------
80,357.00
=========
NOTE 5 PROPERTY AND EQUIPMENT:
Property and equipment at March 31, 1997, is summarized as follows:
Machinery and Equipment 4,643,938
Autos and Trucks 2,636,764
Buildings and Site Improvements 2,797,999
Land 2,100,000
Office Equipment 360,007
----------
12,538,708
LESS: Accumulated Depreciation (710,975)
----------
NET PROPERTY AND EQUIPMENT 11,827,733
==========
NOTE 6 INTANGIBLE ASSETS:
A summary of Intangible Assets and Accumulated Amortization at March 31,
1997, is as follows:
ACCUMULATED NET BOOK
ASSET COST AMORTIZATION VALUE
----- --------- ------------ ---------
Goodwill 6,157,290 76,966 6,080,324
Other Intangibles 750,000 50,000 700,000
--------- ------- ---------
6,907,290 126,966 6,780,324
========= ======= =========
-6-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
APEX WASTE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 7 OTHER ACCRUED LIABILITIES:
The Company's Other Accrued Liabilities at March 31, 1997, consist of
the following:
Sales Tax 4,006.00
Merger Costs 1,282,198.00
Other Accrued Expenses 65,769.00
------------
1,351,973.00
============
NOTE 8 LONG-TERM DEBT:
On March 31, 1997, Apex Waste Services, Inc. and Eastern Environmental
Services, Inc. entered into an exchange of Common Stock which resulted
in Apex Waste Services, Inc. becoming a wholly owned subsidiary of
Eastern Environmental Services, Inc.
On March 31, 1997, Eastern Environmental Services, Inc. advanced
$15,737,099.00 to Apex Waste Services, Inc. by paying off certain bank
debt of Apex Waste Services, Inc.
-7-
Daniel P. Irwin and Associates P.C.
Certified Public Accountants
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
23.1 Consent of Daniel P. Irwin and Associates, P.C.
<PAGE>
Exhibit 23.1
------------
Daniel P. Irwin and Associates P.C.
Certified Public Accountants (610) 688-0666
FAX (610) 688-2426
- -----------------------------------------------------------------------------
687 WEST LANCASTER AVENUE
STRAFFORD-WAYNE, PENNSYLVANIE 19087
May 5, 1997
To The Board of Directors
Apex Waste Services, Inc.
13 Peggy Parkway
Dunmore, Pennsylvania 18512
We hereby consent to the use of our audit report dated April 30, 1997,
relating to the financial statements of Apex Waste Services, Inc., as of and for
the three months ended December 31, 1996 and Waste Management of Pennsylvania,
Inc., Northeast Pennsylvania Division, for the nine months ended September 30,
1996, our compilation report dated April 21, 1997, relating to the financial
statements of Waste Management of Pennsylvania, Inc., Northeast Pennsylvania
Division, as of June 30, 1996 and the twelve months then ended, and our
compilation report dated April 22, 1997, relating to the financial statements of
Apex Waste Services, Inc. and Waste Management of Pennsylvania, Inc., Northeast
Pennsylvania Division, as of March 31, 1997 and the nine month period ended
March 31, 1997, all of which are contained in the current report on Form 8-K/A
of Eastern Environmental Services, Inc., dated March 31, 1997. Additionally, we
also consent to the incorporation by reference of the above mentioned reports in
the Registration Statement on Form S-8 (Registration No. 33-25155, filed on
October 24, 1988), the Registration Statement on Form S-8 (Post-Effective
Amendment No. 2 to Registration No. 33-21251, filed on May 4, 1990), the
Registration Statement on Form S-8 (Registration No. 33-37374, filed on October
18, 1990), the Registration Statement on Form S-8 (Registration No. 33-45250,
filed on January 27, 1992), and the Registration Statement on Form S-3
(Registration No. 333-00283, filed on February 14, 1996) of Eastern
Environmental Services, Inc.
/s/ DANIEL P. IRWIN AND ASSOCIATES P.C.
Strafford-Wayne, Pennsylvania
