<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) April 20, 1998
EASTERN ENVIRONMENTAL SERVICES, INC.
------------------------------------
(Exact name of issuer as specified in charter)
Delaware 0-16102 59-2840783
(State or Other Commission (I.R.S. Employer
Jurisdiction of File Number Identification
Incorporation) 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 7. FINANCIAL STATEMENTS AND PRO FORMA
Financial Information.
-------------------------------------
The Registrant is filing herewith updated financial information for the
pending acquisition of Atlantic Waste Disposal, Inc. ("Atlantic Disposal") and
Atlantic Waste of New York, Inc. ("Atlantic New York") pursuant to the terms of
Agreements for the Sale and Purchase of Stock (the "Stock Purchase Agreements")
dated March 25, 1998 for total consideration of approximately $85.6 million.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Consolidated Balance Sheets as of March 31, 1998 and 1997 (Unaudited)
Consolidated Statements of Operations for the Three Months Ended
March 31, 1998 and 1997 (Unaudited)
Consolidated Statements of Stockholder's Equity for the Three Months Ended
March 31, 1998 and 1997 (Unaudited)
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1998 and 1997 (Unaudited)
Selected Notes to Consolidated Financial Statements (Unaudited)
(B) PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Statement of Operations for the Three Months Ended
March 31, 1998 (Unaudited)
Pro Forma Consolidated Balance Sheet as of March 31, 1998 (Unaudited)
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: May 20, 1998 By: /s/ Gregory M. Krzemien
--------------------------
Gregory M. Krzemien, Chief Financial Officer
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF BRAMBLES WASTE SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS - UNAUDITED
MARCH 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT COMMON STOCK DATA) ASSETS
- -------------------------------------------------------------------------------
1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 271 $ -
Accounts receivable (net of allowance for doubtful
accounts of $35 in 1998 and $424 in 1997) 3,494 2,255
Other current assets 289 148
Assets held for sale - 384
------- -------
Total current assets 4,054 2,787
------- -------
PROPERTY AND EQUIPMENT, At cost 39,207 33,281
Less accumulated depreciation (5,397) (3,609)
------- -------
Property and equipment, net 33,810 29,672
------- -------
OTHER ASSETS:
Deferred acquisition costs (net of accumulated
amortization of $2,987 in 1998 and $1,916 in 1997) 24,528 25,599
Deferred income taxes 9,116 8,096
Escrow accounts, deposits and cash bonds 390 330
Other non-current assets 45 282
------- -------
Total other assets 34,079 34,307
------- -------
TOTAL $71,943 $66,766
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY 1998 1997
CURRENT LIABILITIES:
Due to affiliated company $61,005 $57,234
Accounts payable 723 547
Other current liabilities 2,235 1,067
Cash overdraft - 277
------- -------
Total current liabilities 63,963 59,125
------- -------
NON-CURRENT LIABILITIES - Other non-current liabilities 35 35
CLOSURE RESERVES 945 606
------- -------
Total liabilities 64,943 59,766
------- -------
COMMITMENTS AND CONTINGENCIES (Note 2) - -
STOCKHOLDER'S EQUITY:
Common stock, $1 par value - authorized, 1,000 shares;
issued and outstanding, 100 shares - -
Additional paid-in capital 22,175 20,138
Accumulated deficit 15,175 13,138
------- -------
Total stockholder's equity 7,000 7,000
------- -------
TOTAL $71,943 $66,766
======= =======
See selected notes to consolidated financial statements.
- --------------------------------------------------------------------------------
-1-
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF BRAMBLES WASTE SERVICES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1998 1997
SALES REVENUE $ 6,596 $ 4,024
COST OF SALES 5,223 4,064
------- -------
Gross profit (loss) 1,373 (40)
OPERATING EXPENSES - Selling and administrative expenses 560 527
------- -------
OPERATING INCOME (LOSS) 813 (567)
Other income - 174
Interest expense 1,434 1,346
------- -------
NET LOSS BEFORE INCOME TAXES 621 1,739
INCOME TAX BENEFIT - Deferred 147 569
------- -------
NET LOSS $ 474 $ 1,170
======= =======
See selected notes to consolidated financial statements.
-2-
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF BRAMBLES WASTE SERVICES, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ - $18,968 $11,968 $7,000
Capital contributions - 1,170 - 1,170
Net loss - - 1,170 1,170
------ ------- ------- ------
BALANCE, MARCH 31, 1997 $ - $20,138 $13,138 $7,000
====== ======= ======= ======
BALANCE, JANUARY 1, 1998 $ - $21,701 $14,701 $7,000
Capital contributions - 474 - 474
Net loss - - 474 474
------ ------- ------- ------
BALANCE, MARCH 31, 1998 $ - $22,175 $15,175 $7,000
====== ======= ======= ======
</TABLE>
See selected notes to consolidated financial statements.
-3-
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF BRAMBLES WASTE SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1998 1997
OPERATING ACTIVITIES:
Net loss $ (474) $(1,170)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 812 491
Closure reserves 100 38
Deferred income taxes (147) (569)
Write-down of equipment 51 18
(Increase) decrease in:
Accounts receivable (131) 57
Other current assets (69) 27
Escrow accounts, deposits and cash bonds (4) (22)
Increase (decrease) in:
Accounts payable (1,236) 240
Other current liabilities 961 (335)
Deferred revenue - (124)
------- -------
Net cash used in operating activities (137) (1,349)
------- -------
INVESTING ACTIVITIES:
Purchase of property and equipment (768) (278)
------- -------
Net cash used in investing activities (768) (278)
------- -------
FINANCING ACTIVITIES:
Proceeds from capital contributions 474 1,170
Proceeds from advances from affiliate company 614 275
Cash overdraft - 53
------- -------
Net cash provided by financing activities 1,088 1,498
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 183 (129)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 88 129
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 271 $ -
======= =======
See selected notes to consolidated financial statements.
-4-
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF BRAMBLES WASTE SERVICES, INC.)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of Atlantic Waste Disposal, Inc. and its wholly-owned
subsidiaries: Atlantic of New York, Inc., Atlantic Transportation Services,
Inc. and Resource Products, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The 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 March 31, 1998 and
1997, and results of operations for the three-month periods then ended. The
results of operations for the periods ended March 31, 1998 and 1997 are not
necessarily indicative of the operating results for a full year.
DESCRIPTION OF BUSINESS - Atlantic Waste Disposal, Inc. (the "Company"), a
wholly-owned subsidiary of Brambles Waste Services, Inc., operates a solid
waste landfill facility located in Sussex County, Virginia. Atlantic of New
York, Inc. operates a solid waste transfer station in Brooklyn, New York.
The Company was in development stage until June 1994 when it commenced
accepting solid waste. The Company is primarily engaged in the business of
providing solid waste disposal services through nonhazardous waste disposal
facilities. The Company's customers include municipal, commercial and
industrial customers principally located in the eastern and mid-Atlantic
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. Such estimates include the Company's accounting for closure and
post-closure obligations, amortization of landfill cell costs, site
improvements and certain deferred acquisition costs, and estimates of
reserves such as the allowance for doubtful accounts.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment is stated on the basis of
cost. The Company provides depreciation over the estimated useful lives of
assets using the straight-line method for its property and equipment except
for landfill cells and site improvements. The estimated useful lives are
thirty years for buildings, the term of the lease for leasehold improvements,
five to ten years for vehicles, machinery, and equipment, and five to seven
years for furniture and fixtures.
Landfill cell costs include expenditures for acquisition of land and related
airspace, engineering, permitting, legal, capitalized interest and direct
site preparation costs which management believes are recoverable. The
Company commences depreciating landfill cell costs when construction is
completed and the constructed area begins to accept waste. Landfill cell
costs are depreciated, using the units-of-
-5-
<PAGE>
production method, based upon airspace of landfill capacity consumed during
the fiscal year in relation to estimates of total available airspace. The
Company considers total available airspace to include permitted and active
landfill cells as well as landfill cells which are expected to be permitted
within five years.
Site improvements include various facility construction costs not directly
related to landfill cell construction. The Company depreciates these costs
using the units-of-production method based on airspace consumed to date
relative to estimates of total available airspace.
Annually, the Company prepares topographic analyses of the site using various
survey techniques to confirm airspace utilization during the current year and
remaining capacity. Engineering, legal and other costs associated with the
expansion of permitted capacity are deferred until receipt of all necessary
operating permits. Such costs are capitalized and amortized after receipt of
the necessary operating permits. The Company reviews the realization of
landfill cell development on a periodic basis. The Company capitalizes
interest costs as part of the cost of developing landfill cells and
constructing disposal capacity.
DEFERRED ACQUISITION COSTS - Deferred acquisition costs consist of various
costs associated with obtaining regulatory permits, constructing off-site
improvements to roadways and a railroad bridge, securing operating
agreements, and other costs which are not directly associated with the
purchase of tangible operating assets. Certain acquisition costs directly
associated with the landfill purchase are amortized using the units-of-
production method based on landfill capacity consumed in relation to
estimates of total available airspace. Acquisition costs for obtaining
regulatory permits are amortized using the straight-line method over an
estimated useful life of fifteen years. Acquisition costs associated with
obtaining the regulatory permits to operate the waste transfer station are
amortized ratably over the life of the operating agreement.
LANDFILL CLOSURE AND POST-CLOSURE COSTS - Accrued landfill closure costs
include the cost of closure and post-closure monitoring and maintenance of
the landfill based on currently available facts, existing technology and
interpretation of presently enacted laws and regulations. Landfill post-
closure costs represent management's estimate of the current costs of the
future obligation associated with maintaining and monitoring the landfill for
generally a thirty-year period subsequent to the closure of the landfill.
The Company estimates the future cost of closure and post-closure costs based
on its interpretation of the U.S. Environmental Protection Agency's Subtitle
D technical standards. The Company periodically updates its estimates of
future closure and post-closure costs with the impact of changes in estimates
accounted for on a prospective basis. The Company recognizes these costs on
the units-of-production method based on consumed airspace in relation to
management's estimate of total available airspace.
ESCROW ACCOUNTS, DEPOSITS AND CASH BONDS - The Company is required to
maintain escrow accounts, deposits and cash bonds to secure performance and
compliance with certain laws and regulations of the localities in which it
operates.
REVENUE RECOGNITION - The Company recognizes revenues upon receipt and
acceptance of waste material at its landfill and transfer station. Amounts
billed prior to services being performed are classified as deferred revenue.
-6-
<PAGE>
INCOME TAXES - The Company and its subsidiaries are party to a tax sharing
agreement with its parent, and their results of operations are included in a
consolidated federal income tax return. Current benefits and expenses
related to consolidated federal income taxes are allocated to the Company and
its subsidiaries based on their taxable income or loss.
Deferred income taxes reflect the impact of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Deferred tax assets at March
31, 1998 and 1997 relate primarily to net operating losses. These net
operating losses are recognized by the Company as deferred taxes as they will
be utilized to reduce their parent's consolidated federal income tax.
RELATED PARTY TRANSACTIONS - The parent of Brambles Waste Services, Inc.,
Brambles USA, Inc., provides funding for landfill construction and purchases
of assets as well as working capital advances for operations. Interest on
the funding from Brambles USA, Inc. is charged monthly on the unpaid balance
at First Chicago Bank's prime rate. Brambles USA, Inc. also provides
management services to the Company for which it receives a management fee.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
consist primarily of cash and cash equivalents, trade receivables, trade
payables and debt instruments. The book value of cash and cash equivalents,
trade receivables and trade payables are considered to be representative of
their respective fair values. The carrying value of the Company's long-term
debt approximate fair value based on current rates and terms.
LONG-LIVED ASSETS - Long-lived assets consist primarily of property and
equipment and certain intangible assets. The recoverability of long-lived
assets is evaluated by an analysis of operating results and consideration of
other significant events or changes in the business environment. If
impairment exists, the carrying amount of the long-lived assets is reduced to
its estimated fair value.
RECENT ACCOUNTING PRONOUNCEMENT - In October 1996, the AICPA issued SOP 96-
1, "Environmental Remediation Liabilities." The SOP provides guidance with
respect to the recognition, measurement and disclosure of environmental
remediation liabilities. The Company adopted SOP 96-1 in the first quarter
of fiscal 1998; however, the effect of such adoption was not material.
2. COMMITMENTS AND CONTINGENCIES
PROPOSED SALE - On March 25, 1998, Brambles Waste Services, Inc. entered
into definitive agreement with Eastern Environmental Services, Inc. for the
proposed sale of all of the Company's outstanding common stock for total
consideration of $85,600 subject to certain terms and conditions. In
addition, the acquisition of the Company is subject to the waiver or
expiration of a 90-day right of first refusal to acquire the landfill by a
third party.
LAWS AND REGULATIONS - The Company is subject to extensive and evolving
federal, state, and local environmental laws and regulations in the United
States and elsewhere that have been enacted in response to technological
advances and the public's increased concern over environmental issues. The
majority of expenditures necessary to comply with environmental laws and
regulations are made in the normal course of business. Although the Company,
to the best of its knowledge, is in compliance in all material respects with
the laws and regulations affecting its operations, there is no assurance that
the Company will not have to expend substantial amounts for compliance in the
future.
-7-
<PAGE>
The Company is subject to the 1996 Air Regulation "New Source Performance
Standards" for control of landfill gas emissions. The Company filed the
initial notification required by this regulation indicating that it had not
passed the threshold in landfill gas emissions requiring installation of
control devices. The quantity of waste managed up to this point in Cell 1
would not have generated sufficient landfill gas to require installation of
control devices. With increased waste volumes, and operation of Cell 2,
during fiscal 1997 the Company may have passed this threshold, and an
evaluation is currently being completed by management. If the threshold has
been exceeded, the Company must design a control system, most likely a flare
device, and obtain the necessary air permits from the VA DEQ.
LITIGATION - The Company is involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material effect on
the Company's consolidated financial position, results of operations or
liquidity.
LANDFILL LEASE - The Company has entered into a Contract and Ground Lease
Agreement with Sussex County, Virginia, (the "County"). Under the agreement,
the Company has conveyed its leasehold rights in the landfill site to the
County. The term of the agreement extends for twenty-five years with
automatic one-year extensions until the entire capacity of the landfill has
been utilized. The Contract and Ground Lease Agreement was most recently
amended on December 20, 1996 resulting primarily in revisions to the amount
of base rent paid to the County.
Upon the expiration of the agreement, the Company must pay a termination fee
of $100 to the County unless the Company exercises the purchase option
contained in the agreement. The purchase option allows the Company to
purchase the landfill property and improvements at the expiration of the
agreement for the fair market value of the buildings, but in no event will
the purchase price be less than $500.
OPERATING PERMIT - The Conditional Use Permit, which grants the Company
approval to operate the landfill, requires that the Company establish an
escrow account and fund the account at a rate of $5 per acre for each acre of
the landfill used for disposal. The escrow funds and interest thereon shall
be held for the benefit of the County subject to certain withdrawal terms.
Ten years subsequent to approval of the final closure of the landfill, 50% of
the escrow funds and interest thereon may be disbursed to the Company. The
remaining balance will be paid to the Company twenty years after final
closure of the landfill. However, the County shall be entitled to draw upon
the escrow account in the event of any material contamination of the landfill
or release of contaminants which is not promptly remedied by the Company.
The Conditional Use Permit also contains a provision which requires the
Company to reimburse the County annually for the cost of inspection and
analysis of the waste material at the landfill. Such costs are to be
reimbursed at actual costs not to exceed $125 annually. The maximum
reimbursable costs is to increase at $25 increments every five years.
The Company has entered into an operating agreement with the assignor of the
landfill Conditional Use Permit which provides for royalty payments to the
assignor based on the gate price of each ton of waste accepted and quarterly
waste receipts. The agreement also contains a covenant that requires the
Company to maintain its stockholder's equity in an amount which does not fall
below $7,000.
-8-
<PAGE>
WETLANDS MITIGATION - The Company's total available airspace used to
depreciate landfill cells, site improvements and certain deferred acquisition
costs contains 12.5 acres of unpermitted wetlands. The Company expects to
submit a standard permit application to the U.S. Army Corps of Engineers in
July 1998 requesting permission to mitigate the wetlands on site. Regulatory
review by the U.S. Army Corps of Engineers is expected to conclude by
December 1999. Although there is no assurance that regulatory approval of
the standard permit application will be granted, the Company is not aware of
any matters that would preclude approval.
LANDFILL OPERATIONS AGREEMENT - The Company has subcontracted landfill
operations to a company which provides equipment operators and heavy landfill
equipment for the spreading of waste to active landfill cells. The
subcontract agreement is for a period of five years, and provides for monthly
charges based on machine hours.
LETTERS OF CREDIT - The Company is required to maintain letters of credit
to guarantee performance under certain agreements, primarily closure and
post-closure reserve obligations.
WASTE TRANSFER CONTRACT - The Company entered into a three-year contract in
November 1997 whereby the transfer of solid waste intermodal containers to
and from railcars, and transportation of the containers to the active
landfill from the Company's rail siding was contracted to a third party. The
Company is charged a drayage fee by the ton and is required to meet a monthly
minimum tonnage amount.
* * * * * *
-9-
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
The following unaudited pro forma consolidated statement of operations for
the three months ended March 31, 1998 gives effect to the pending acquisition of
Atlantic Waste Disposal, Inc. ("Atlantic Disposal") and Atlantic Waste of New
York, Inc. ("Atlantic New York") pursuant to the terms of Agreements for the
Sale and Purchase of Stock (the "Stock Purchase Agreements") dated March 25,
1998 for total consideration of approximately $85.6 million.
The following unaudited pro forma consolidated statement of operations for
the three months ended March 31, 1998 gives effect to the aforementioned
transaction as if the transaction had occurred on January 1, 1998. 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 unaudited pro forma financial data and
related pro forma adjustments have been prepared by the Registrant's management
based in part on historical financial information provided by the management of
completed and pending acquisitions. 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 as filed in the
Company's report on Form 8-K (filed May 20,1998) and the historical financial
statements of Atlantic Waste Disposal, Inc. appearing elsewhere in this filing.
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EASTERN
ENVIRON- PRO
MENTAL PRO FORMA FORMA
SERVICES, INC. ATLANTIC ADJUSTMENTS CONSOLIDATED
-------------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues................ $55,193 $ 6,596 $-- $ 61,789
Cost of revenues........ 34,496 4,411 33(a) 38,940
Selling, general, and
administrative
expenses............... 7,023 560 -- 7,583
Depreciation and
amortization........... 4,332 812 -- 5,144
Merger costs............ 3,945 -- -- 3,945
------- ------- ---- ----------
Operating income........ 5,397 813 (33) 6,177
Interest (expense)
income, net............ (983) (1,434) (11)(b) (2,428)
Other (expense) income,
net.................... (121) -- -- (121)
------- ------- ---- ----------
Income (loss) before
income taxes........... 4,293 (621) (44) 3,628
Income tax (expense)
benefit................ (3,700) 147 -- (3,553)
------- ------- ---- ----------
Net income.............. $ 593 $ (474) $(44) $ 75
======= ======= ==== ==========
Diluted earnings per
share.................. $ --
----------
Weighted average number
of shares outstanding.. 26,438,209
==========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
The following unaudited pro forma consolidated balance sheet at March 31,
1998 gives effect to the pending acquisition of Atlantic Disposal and Atlantic
New York pursuant to the terms of Agreements for the Sale and Purchase of Stock,
both dated March 25, 1998. The Registrant will purchase all of the outstanding
stock of Atlantic Disposal and Atlantic New York for total consideration of
approximately $85.6 million. The Atlantic Disposal and Atlantic New York
transactions are anticipated to be accounted for using the "purchase" method.
The following unaudited pro forma financial data may not be indicative of what
the financial condition of the Company 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 the Company that may
exist in the future. The unaudited pro forma financial data and related pro
forma adjustments have been prepared by the Registrant's management based in
part on historical financial information provided by the management of completed
and pending acquisitions. 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 report on Form
8-K (filed May 20, 1998) and the historical financial statements of Atlantic
Waste Disposal, Inc. appearing elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EASTERN
ENVIRONMENTAL PRO FORMA PRO FORMA
SERVICES, INC. ATLANTIC ADJUSTMENTS CONSOLIDATED
-------------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents........... $ 4,660 $ 271 $ -- $ 4,931
Accounts receivable,
net of allowance...... 27,434 3,494 -- 30,928
Deferred income taxes.. 1,833 -- -- 1,833
Prepaid expenses and
other current assets.. 7,458 289 -- 7,747
-------- -------- -------- --------
Total current assets.. 41,385 4,054 -- 45,439
-------- -------- -------- --------
Net property, plant and
equipment.............. 162,460 33,810 50,953 (1) 247,223
Excess cost over fair
market value of net
assets acquired........ 81,653 -- -- 81,653
Intangible assets, net.. 14,930 24,528 (24,528)(1) 14,930
Notes receivable from
stockholders/officers.. 442 -- -- 442
Deferred income taxes... -- 9,116 (9,116)(1) --
Other assets............ 4,923 435 -- 5,358
-------- -------- -------- --------
Total assets.......... $305,793 $ 71,943 $ 17,309 $395,045
======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable....... $ 13,874 $ 723 $ -- $ 14,597
Accrued expenses and
other current
liabilities........... 16,462 2,235 (286)(1) 18,411
Income taxes payable... 877 -- -- 877
Current portion of
accrued landfill
closure and other
environmental costs... 4,056 -- -- 4,056
Current portion of
long-term debt........ 1,211 -- -- 1,211
Current portion of
capitalized lease
obligations........... 1,177 -- -- 1,177
Deferred revenue....... 3,514 -- -- 3,514
Due to affiliated
company............... -- 61,005 (61,005)(1) --
-------- -------- -------- --------
Total current
liabilities.......... 41,171 63,963 (61,291) 43,843
-------- -------- -------- --------
Deferred income taxes... 6,242 -- -- 6,242
Long-term debt, less
current portion........ 62,837 -- 85,600 (1) 148,437
Capitalized lease
obligations, less
current portion........ 1,022 -- -- 1,022
Accrued landfill closure
and other environmental
costs.................. 14,868 945 -- 15,813
Other liabilities....... 19,222 35 -- 19,257
Stockholders' equity
Common stock........... 252 -- -- 252
Additional paid-in
capital............... 147,467 22,175 (22,175)(1) 147,467
Retained earnings
(deficit)............. 12,788 (15,175) 15,175 (1) 12,788
Less treasury stock at
cost--39,100 common
shares................ (76) -- -- (76)
-------- -------- -------- --------
Total stockholders'
equity............... 160,431 7,000 (7,000) 160,431
-------- -------- -------- --------
Total liabilities and
stockholders' equity. $305,793 $ 71,943 $ 7,309 $395,045
======== ======== ======== ========
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EASTERN ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 HAS
BEEN ADJUSTED TO REFLECT THE FOLLOWING:
(1) On March 25, 1998, the Company entered into stock purchase agreements
for the pending acquisitions of all the outstanding stock of Atlantic Waste
Disposal, Inc. and Atlantic of New York, Inc. (collectively, "Atlantic") for
total anticipated cash consideration to be paid by Eastern Environmental
Services, Inc. of $85.6 million. The acquisition is anticipated to be
accounted for under the purchase method. Pursuant to the terms of the stock
purchase agreements, certain property, equipment, intangible assets, other
assets and working capital will be acquired and certain liabilities will be
assumed. With respect to the closure and post-closure liabilities, the Company
anticipates recording an 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 allocation of the purchase price is preliminary and assumes
the historical book value of tangible assets approximates fair value. The
actual allocation will be based on management's final evaluation of such
assets and liabilities. The excess of the purchase price over the historic
cost of net assets was allocated to the value of the landfill site; however,
this excess may ultimately be allocated to other specific tangible and
intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ significantly from the pro forma
amounts included herein. The preliminary allocation of the purchase price is
as follows:
<TABLE>
<S> <C>
Property, equipments and landfill site......................... $84,763,000
Current assets acquired........................................ 4,054,000
Other assets acquired.......................................... 435,000
Other liabilities.............................................. (2,707,000)
Landfill closure, post-closure, and other environmental costs.. (945,000)
-----------
Borrowings under the Company's revolving credit facility to
affect the acquisition of Atlantic............................ $85,600,000
===========
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THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1998 HAS BEEN ADJUSTED TO REFLECT THE FOLLOWING:
(a) 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 Atlantic had been completed on July 1, 1996 net of historical
depreciation and amortization expense of Atlantic 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.
(b) To record additional interest expense of $11,000 from borrowings (at the
Company's average borrowing rate of approximately 6.75% under the Company's
revolving credit facility) of $85.6 million incurred to consummate the
acquisition of Atlantic, net of historical interest expense of $1.4 million.
