<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) August 15, 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
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 August 15, 1997, Eastern Environmental Services, Inc. (the "Registrant')
acquired all of the outstanding shares of stock of Harford Disposal, Inc. (the
"Company") pursuant to the terms of an Agreement for the Sale and Purchase of
Stock (the "Agreement") dated August 15, 1997 by the Registrant and Blake Van
Leer (the "Seller"). The Seller is not affiliated with the Registrant nor with
any of the Registrant's subsidiaries. The description of the acquisition
transaction set forth herein is qualified in its entirety by reference to the
Agreement, which is incorporated as Exhibit 10.1.
Pursuant to the Agreement, Registrant purchased all of the outstanding
stock of the Company and the Company's rights and property interests under an
agreement to purchase all of the outstanding stock of Pappy, Inc. ("Pappy"),
which is in the business of operating a construction and demolition debris
landfill in Harford County, Maryland, known as the Oak Avenue Rubble Landfill,
for consideration of $100,000 from working capital. Prior to the Registrant's
acquisition of Harford Disposal, Inc. (the "Company") the Company negotiated and
entered into an Agreement for the Sale and Purchase of the stock of Pappy, Inc.
(the "Contract") dated August 15, 1997. The parties to the Contract are Timothy
K. Stancill, Jerry L. Stancill, Terry D. Stancill and Timothy D. Stancill
(collectively referred to as the "Stockholders") and Harford Disposal, Inc.
Pursuant to the Contract, the Company purchased all of the outstanding stock of
Pappy on August 15, 1997 for consideration of $10,187,500. The purchase of the
outstanding shares of Pappy pursuant to the Contract were funded by the
Registrant from working capital. The description of the acquisition of the Pappy
stock is qualified in its entirety by reference to the Contract, which is
incorporated as Exhibit 10.2.
Additionally, on the date of closing the Agreement and the Contract, the
Registrant and Blake Van Leer ("Consultant") entered into a 15-year Consulting
Agreement with Harford Disposal, Inc. ("Subsidiary") to provide consulting
expertise in landfill operations and permit issues in Maryland. A consulting fee
of $1,712,500 was paid to Consultant at closing for all services to be rendered
by Consultant to Subsidiary during the Agreement term. The Consulting Agreement
set forth herein is qualified in its entirety by reference to the Agreement,
which is incorporated as Exhibit 10.3.
The acquisition of Pappy, Inc. includes substantially all of the assets and
certain liabilities relating to the operation of the Oak Avenue Rubble Landfill.
The acquired assets, including certain landfill equipment, permits and two
parcels of real estate, were used by Pappy, Inc. in the operation of the
landfill. The Registrant intends to continue to use the acquired assets for this
purpose. The assumed liabilities consisted of certain amounts due to vendors.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS.
-----------------------------------
Harford Disposal, Inc.'s only activity was the acquisition of Pappy, Inc. and
therefore Pappy, as the predecessor company, constitutes the business acquired
by the Registrant.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Auditors.
Balance Sheets as of October 31, 1996 and 1995.
Statements of Income and Retained Earnings for the Years Ended October
31, 1996 and 1995.
Statements of Cash Flows for the Years Ended October 31, 1996 and
1995.
Notes to Financial Statements.
Balance Sheet as of June 30, 1997. (Unaudited)
Statement of Income and Retained Earnings for the Eight Months Ended
June 30, 1997. (Unaudited)
Statement of Cash Flows for the Eight Months Ended June 30, 1997.
(Unaudited)
Selected Notes to Financial Statements. (Unaudited)
(B) PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Statement of Income for the Year Ended
June 30, 1997. (Unaudited)
Pro Forma Balance Sheet as of June 30, 1997. (Unaudited)
(C) EXHIBITS
*10.1 Agreement for the Sale and Purchase of the Stock of Harford Disposal,
Inc. made as of August 15, 1997, by and between Blake Van Leer (the
"Seller") and Eastern Environmental Services, Inc., ("Purchaser").
*10.2 Agreement for the Sale and Purchase of the Stock of Pappy, Inc. made
as of August 15, 1997, by and between Timothy K. Stancill, Jerry L.
Stancill, Terry D. Stancill and Timothy D. Stancill (collectively
referred to as the "Stockholders") and Harford Disposal, Inc.,
("Purchaser").
*10.3 Consulting Agreement as of August 15, 1997, by and between Eastern
Environmental Services, Inc., Harford Disposal, Inc. and Blake Van
Leer.
23.1 Consent of Ernst & Young LLP
________________________________________________________________________________
* Incorporated by reference.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities and 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: October 10, 1997 By: /s/ Louis D. Paolino, Jr.
----------------------------------
Louis D. Paolino, Jr., President
<PAGE>
Financial Statements
Pappy, Inc.
Years ended October 31, 1996 and 1995
with Report of Independent Auditors
<PAGE>
Pappy, Inc.
Financial Statements
Years ended October 31, 1996 and 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. 1
Financial Statements
Balance Sheets............................................................. 2
Statements of Income and Retained Earnings................................. 4
Statements of Cash Flows................................................... 5
Notes to Financial Statements.............................................. 6
</TABLE>
<PAGE>
Report of Independent Auditors
Stockholders
Pappy, Inc.
We have audited the accompanying balance sheets of Pappy, Inc. as of October 31,
1996 and 1995, and the related statements of income and retained earnings, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pappy, Inc. at October 31, 1996
and 1995, and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania /s/ Ernst & Young LLP
September 12, 1997
<PAGE>
Pappy, Inc.
Balance Sheets
<TABLE>
<CAPTION>
October 31
1996 1995
--------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 838,047 $ 542,625
Accounts receivable, less allowance for doubtful
accounts of $18,575 and $9,655 115,686 180,884
Due from affiliated company - 6,788
Due from employees 3,930 3,800
Due from officers 19,927 19,927
--------------------------------
Total current assets 977,590 754,024
Property and equipment:
Land 153,400 153,400
Buildings and leasehold improvements 107,687 107,687
Vehicles 36,856 8,688
Machinery and equipment 627,953 529,778
Furniture and fixtures 33,056 31,792
--------------------------------
Total property and equipment 958,952 831,345
Accumulated depreciation and amortization 425,868 311,041
--------------------------------
533,084 520,304
Deferred costs, net of accumulated amortization of
$47,650 and $40,991 124,870 131,529
Refundable deposit of income taxes 94,692 74,216
Other assets (including $221,659 of restricted cash on
deposit for landfill closure bonding in 1996) 221,864 168
--------------------------------
Total assets $1,952,100 $1,480,241
================================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
October 31
1996 1995
--------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 50,659 $ 12,265
--------------------------------
Total current liabilities 50,659 12,265
Notes payable to related party 250,000 250,000
Accrued landfill closure costs 694,096 594,000
Stockholders' equity:
Common stock; no par value; 5,000 shares authorized;
600 shares issued and outstanding 100 100
Retained earnings 957,245 623,876
--------------------------------
Total stockholders' equity 957,345 623,976
--------------------------------
Total liabilities and stockholders' equity $ 1,952,100 $1,480,241
================================
</TABLE>
See accompanying notes.
3
<PAGE>
Pappy, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Year ended October 31
1996 1995
--------------------------------
<S> <C> <C>
Revenues $ 3,321,792 $ 2,550,998
Cost of revenues 776,228 630,298
Selling, general, and administrative expenses 437,563 388,865
Depreciation and amortization 133,067 115,999
--------------------------------
Operating income 1,974,934 1,415,836
Interest income (expense) 10,753 (13,781)
Other (expense) income (648) 2,811
--------------------------------
Net income 1,985,039 1,404,866
Retained earnings, beginning of year 623,876 665,010
Distributions to stockholders (1,651,670) (1,446,000)
--------------------------------
Retained earnings, end of year $ 957,245 $ 623,876
================================
</TABLE>
See accompanying notes.
4
<PAGE>
Pappy, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended October 31
1996 1995
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,985,039 $ 1,404,866
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 133,067 115,999
Provision for losses on receivables 8,920 9,655
Landfill closure costs 100,096 56,500
Changes in operating assets and liabilities:
Accounts receivable 56,278 (39,572)
Other assets (242,172) (30,262)
Accounts payable and accrued expenses 38,394 (12,619)
------------------------------
Net cash provided by operating activities 2,079,622 1,504,567
INVESTING ACTIVITIES
Purchase of property and equipment (139,188) (103,633)
------------------------------
Net cash used in investing activities (139,188) (103,633)
FINANCING ACTIVITIES
Payments on long-term debt - (93,926)
Net receipts from affiliated company 6,788 -
Net advances to employees and officers (130) (22,602)
Distributions to stockholders (1,651,670) (1,446,000)
------------------------------
Net cash used in financing activities (1,645,012) (1,562,528)
------------------------------
Net increase (decrease) in cash and cash
equivalents 295,422 (161,594)
Cash and cash equivalents at beginning of year 542,625 704,219
------------------------------
Cash and cash equivalents at end of year $ 838,047 $ 542,625
==============================
</TABLE>
See accompanying notes.
5
<PAGE>
Pappy, Inc.
Notes to Financial Statements
October 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Pappy, Inc. ("the Company") operates a construction and demolition debris
landfill. The Company's customers include municipal and commercial customers
throughout principally the eastern United States.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
regarding the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
INCOME TAXES
The stockholders of the Company have elected under Subchapter S of the Internal
Revenue Code to include the Company's income in their own income for federal and
state income tax purposes. Accordingly, no provision for income taxes has been
recorded in the financial statements. It is the Company's intent to distribute,
at a minimum, sufficient dividends for the stockholders to pay the income tax
liabilities on the Company's taxable income.
PROPERTY AND EQUIPMENT
Property and equipment is stated on the basis of cost. The Company provides
depreciation over the estimated useful lives of the assets using accelerated
methods for its property and equipment.
LANDFILL CLOSURE
Accrued landfill closure costs include the cost of closure and post-closure
monitoring and maintenance of the landfill which are estimated based on
currently available facts, existing technology, and interpretation of presently
enacted laws and regulations. The Company recognizes these costs on the unit-of-
production method based on consumed airspace in relation to management's
estimate of total available airspace.
6
<PAGE>
Pappy, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED COSTS
Deferred costs consist of expenditures for engineering, permitting, and certain
direct preparation costs of the landfill site that management believes are
recoverable. These costs are being depreciated based upon consumed airspace
using the unit-of-production method of airspace filled during the fiscal year in
relation to total estimates of available airspace.
REVENUE RECOGNITION
The Company recognizes revenue upon acceptance and receipt of waste material at
the landfill site.
CASH EQUIVALENTS
The Company considers all highly liquid investments to be cash equivalents.
2. ACCOUNTS RECEIVABLE
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company maintains an allowance for doubtful
accounts at a level that management believes is sufficient to cover potential
credit losses.
3. RELATED PARTY TRANSACTIONS
The Company's notes payable are due to the estate of an individual which is a
related party to the Company. The notes bear interest at a rate of one percent
above the rate paid by a financial institution on a twelve-month certificate of
deposit. The notes are due in April 2016.
The Company is charged a management fee from Stancill, Inc. ("Stancills"), a
related party. This management fee is to cover certain overhead costs paid by
Stancills. Total expense related to this management fee was approximately
$83,000 and $85,000 for the fiscal years ended October 31, 1996 and 1995,
respectively.
7
<PAGE>
Pappy, Inc
Notes to Financial Statements (continued)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
At October 31, 1995, Stancills had certain cash on deposit for landfill closure
bonding. During 1996, the obligation to maintain this cash as restricted was
transferred to the Company. Accordingly, $221,659 of cash has been classified
with other long-term assets at October 31, 1996.
4. SUBSEQUENT EVENT
On August 15, 1997, all of the outstanding stock of Harford Disposal, Inc.
("Harford") was acquired by Eastern Environmental Services, Inc. and immediately
thereafter, all of the outstanding stock of Pappy, Inc. was purchased by Harford
for total consideration paid by Eastern Environmental Services, Inc. of
approximately $12,000,000.
8
<PAGE>
<TABLE>
<CAPTION>
PAPPY, INC.
BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<S> <C>
ASSETS
Currents assets:
Cash and cash equivalents $ 225,084
Accounts receivable, less allowance
for doubtful accounts 58,728
Due from employees 2,004
Due from officers 19,927
-------------
Total current assets 305,743
Property and equipment:
Land 153,400
Buildings and leasehold improvements 107,687
Vehicles 36,856
Machinery and equipment 627,953
Furniture and fixtures 33,056
-------------
Total Property and equipment 958,952
Accumulated depreciation and amortization 489,870
-------------
469,082
Deferred costs, net of accumulated amortization 121,282
Refundable deposit of income taxes 135,961
Other assets (including $225,839 of restricted
cash for landfill closure) 226,044
-------------
Total assets $1,258,112
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 29,091
-------------
Total current liabilities 29,091
Notes payable to related party 250,000
Accrued landfill closure costs 746,428
Stockholders' equity:
Common stock; no par value; 5,000 shares
authorized; 600 shares issued and outstanding 100
Retained earnings 232,493
-------------
Total stockholders' equity 232,593
-------------
-------------
Total liabilities and stockholders' equity $1,258,112
=============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAPPY, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE EIGHT MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<S> <C>
Revenues $ 1,318,035
Cost of Revenues 526,111
Selling, general and administrative expenses 266,490
Depreciation and amortization 67,590
-----------------
Operating income 457,844
Interest income, net 5,306
Other income, net 4,800
-----------------
Net income 467,950
-----------------
Retained earnings, beginning of year 957,245
Distributions to stockholders (1,192,702)
-----------------
Retained earnings, end of year $ 232,493
=================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAPPY, INC.
STATEMENT OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<S> <C>
OPERATING ACTIVITIES
Net income $ 467,950
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 67,590
Landfill closure costs 52,332
Changes in operating assets and liabilities:
Accounts receivable 56,958
Other assets (45,449)
Accounts payable and accrued expenses (21,568)
--------------------
Net cash provided by operating activities 577,813
FINANCING ACTIVITIES
Net receipts from employees and officers 1,926
Distributions to stockholders (1,192,702)
--------------------
Net cash used in financing activities (1,190,776)
--------------------
Net decrease in cash (612,963)
Cash and cash equivalents at beginning of period 838,047
--------------------
Cash and cash equivalents at end of period $ 225,084
====================
</TABLE>
<PAGE>
PAPPY, INC. NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Pappy, Inc. (the "Company") operates a construction and demolition debris
landfill. The Company's customers include municipal and commercial customers
throughout principally the eastern United States.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
regarding the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
The condensed interim financial statements reflect all adjustments (which
include only normal recurring adjustments), which in the opinion of management,
are necessary to present fairly the financial position at June 30, 1997, and
results of operations for the eight months then ended. The results of
operations for the period ended June 30, 1997 are not necessarily indicative of
the operating results for a full year.
2. SUBSEQUENT EVENT
On August 15, 1997, all of the outstanding stock of Harford Disposal, Inc.
("Harford") was acquired by Eastern Environmental Services, Inc. and immediately
thereafter, all of the outstanding stock of Pappy, Inc. was purchased by Harford
for total consideration paid by Eastern Environmental Services, Inc. of
approximately $12,000,000.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR
THE YEAR ENDED JUNE 30, 1997
On August 15, 1997, all of the outstanding stock of Harford Disposal,
Inc. ("Harford") was acquired by Eastern Environmental Services, Inc. and
immediately thereafter, all of the outstanding stock of Pappy, Inc. was
purchased by Harford for total consideration paid by Eastern Environmental
Services, Inc. of approximately $12,000,000. The following unaudited pro forma
consolidated Statement of Income for the year ended June 30, 1997 gives effect
to the aforementioned transactions as if the transactions had occurred on July
1, 1996. Harford's only activity was the acquisition of Pappy, Inc. and
therefore Pappy, as the predecessor company, constitutes the business acquired
by the Registrant.
The following unaudited pro forma financial data may not be indicative
of what the results of operations or financial position 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 or financial position 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
consolidated financial statements and notes of Eastern Environmental Services,
Inc. as of June 30, 1997 and for each of the three years in the period then
ended and the historical financial statements of Pappy, Inc. appearing elsewhere
in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR
THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Eastern Pro
Environmental Pro Forma Forma
Services, Inc. Pappy, Inc. Adjustments Consolidated
-------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $79,625,420 $2,803,860 $ -- $ 82,429,280
Cost of revenues 53,130,199 910,970 411 (1) 54,041,580
Selling, general and
administrative expenses 12,778,548 430,787 (86,918) (2) 13,122,417
Depreciation and
amortization 4,742,370 107,914 745,434 (1) 5,595,718
Merger costs 3,336,792 -- -- 3,336,792
---------- --------- --------- ----------
Operating income 5,637,511 1,354,189 (658,927) 6,332,773
Interest (expense) income, net (2,662,729) 13,717 9,750 (3) (2,639,262)
Other income, net 508,778 552 -- 509,330
----------- ---------- --------- ----------
Income before income taxes 3,483,560 1,368,458 (649,177) 4,202,841
Income tax expense 1,341,205 -- 303,000 (4) 1,644,205
----------- ---------- --------- ----------
Net income $ 2,142,355 $1,368,458 $(952,177) $ 2,558,636
=========== =========== ========= ===========
Net income per share $ .17
===========
Weighted average number of 14,976,802
shares outstanding ===========
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR ENDED JUNE 30, 1997
(1) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Pappy had been completed on July 1, 1996 net of historical
depreciation and amortization expense of Pappy and to reflect the Company's
methodology of amortizing landfill site costs and closure and post-closure
costs. Landfill site costs and closure and post-closure costs are amortized
based upon consumed airspace using the unit-of-production method of
airspace filled during the period in relation to estimates of total
available airspace.
(2) To eliminate a administrative charges related directly to cost
sharing arrangements provided by Pappy's prior parent, which were
terminated as a result of the purchase transaction.
(3) To eliminate interest expense of $9,750 related to debt of Pappy, Inc. not
acquired by the Registrant.
(4) The Company's pro forma effective tax provision is provided at an effective
rate of 42%.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(1) On August 15, 1997, all of the outstanding stock of Harford Disposal, Inc.
("Harford") was acquired by Eastern Environmental Services, Inc. and
immediately thereafter, all of the outstanding stock of Pappy, Inc. was
purchased by Harford for total consideration paid by Eastern Environmental
Services, Inc. of approximately $12,000,000. Harford's only activity was
the acquisition of Pappy, Inc. and therefore Pappy, as the predecessor
company, constitutes the business acquired by the Registrant. The
acquisition has been accounted for under the purchase method. Pursuant to
the terms of the acquisition agreements, certain property, equipment, other
assets and working capital were acquired for consideration of $12,000,000
in cash. With respect to the closure and post-closure liabilities, the
Company recorded a $750,000 liability at the date of the acquisition
representing the Company's estimate of closure and post-closure liability
for the entire site utilizing engineering studies and state requirements as
compared to the percentage of airspace utilized at the date of the
acquisition. The preliminary allocation of the purchase price is as
follows:
<TABLE>
<S> <C>
Property, equipment and landfill
site................................. $12,724,000
Current assets acquired................ 55,000
Other liabilities...................... (29,000)
-----------
Landfill closure and post-closure
costs................................ (750,000)
-----------
$12,000,000
===========
</TABLE>
The pro forma adjustment to record the purchase price is net of the
following assets and liabilities not assumed based on the unaudited June
30, 1997 balance sheet:
<TABLE>
<S> <C>
Property and equipment, net........... $ 219,080
Current assets........................ 247,015
Other assets.......................... 362,005
Other liabilities..................... (250,000)
---------
Net liabilities not assumed........... $ 578,100
=========
</TABLE>
In August, 1997, the Company completed the sale and registration of 5,175,000
shares of its common stock which generated net proceeds of approximately $85.5
million. The acquisition was funded with a portion of these proceeds. In the
June 30, 1997 pro forma balance sheet, the funding of the acquisition has been
shown as borrowings under the Company's credit facility.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Eastern
Environmental Pro Forma Pro Forma
Services, Inc. Pappy, Inc. Adjustments As Adjusted
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents..................... $ 4,292,278 $ 225,084 $ (225,084) (1) $ 4,292,278
Accounts receivable, net of
allowance................................... 13,508,730 58,728 -- 13,567,458
Deferred income taxes......................... 3,369,014 -- -- 3,369,014
Prepaid expenses and other current
assets...................................... 4,538,198 21,931 (21,931) (1) 4,538,198
------------ ---------- ----------- ------------
Total current assets........................ 25,708,220 305,743 (247,015) (1) 25,766,948
Net property, plant & equipment .............. 66,143,633 590,364 12,126,427 (1) 78,860,424
Assets held for resale......................... 358,758 -- -- 358,758
Excess cost over fair market value of
net assets acquired........................... 60,302,159 -- -- 60,302,159
Intangible assets, net......................... 6,079,686 -- 6,079,686
Notes receivable from stockholders /
officers...................................... 432,902 -- -- 432,902
Other assets................................... 2,060,054 362,005 (362,005) (1) 2,060,054
------------ ---------- ----------- ------------
Total assets................................ $161,085,412 $1,258,112 $11,517,407 $173,860,931
============ ========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities on long-term
debt........................................ $ 1,803,269 -- -- $ 1,803,269
Current maturities of obligations
under capital leases........................ 1,249,769 -- -- 1,249,769
Accounts payable............................... 8,036,964 29,091 -- 8,066,055
Accrued expenses and other current
liabilities................................. 12,854,591 -- -- 12,854,591
Income taxes payable........................... 387,342 -- -- 387,342
Current portion of accrued landfill
closure and other environmental
costs....................................... 2,228,000 -- -- 2,228,000
------------ ---------- ----------- ------------
Total current liabilities.................. 26,559,935 29,091 -- 26,589,026
Deferred income taxes.......................... 5,716,590 -- -- 5,716,590
Long-term debt................................. 59,303,672 250,000 11,750,000 (1) 71,303,672
Capital lease obligations--
long-term................................... 1,625,741 -- -- 1,625,741
Accrued landfill closure and other
environmental costs......................... 6,891,219 746,428 -- 7,637,647
Other long-term liabilities.................... 9,151,246 -- -- 9,151,246
Stockholders' equity
Common stock................................ 161,530 100 (100) (1) 161,530
Additional paid-in capital.................. 50,072,591 -- -- 50,072,591
Retained earnings (deficit)................. 1,679,147 232,493 (232,493) (1) 1,679,147
Less treasury stock at cost--
39,100 common shares...................... (76,259) -- -- (76,259)
------------ ---------- ----------- ------------
Total stockholders' equity................ 51,837,009 232,593 (232,593) 51,837,009
------------ ---------- ----------- ------------
Total liabilities and stockholders'
equity.................................. $161,085,412 $1,258,112 $11,517,407 $173,860,931
============ ========== =========== ============
</TABLE>
<PAGE>
EXHIBIT
NO. DESCRIPTION
--- -----------
23.1 Consent of Ernst & Young, LLP
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference 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), the Registration Statement on Form S-3 (Registration No. 333-00283,
filed on February 14, 1996), and the Registration Statement on Form S-8
(Post-Effective Amendment No. 1 to Registration Statement No. 333-28627, filed
on June 20, 1997) of our report dated September 12, 1997, with respect to the
financial statements of Pappy, Inc. Included in Eastern Environmental Services,
Inc.'s Current Report on Form 8-K dated August 15, 1997 (as amended October 10,
1997 on Form 8-K/A), filed with the Securities and Exchange Commission.
Philadelphia, Pennsylvania /s/ Ernst & Young LLP
October 9, 1997
