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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-37845
EASTERN ENVIRONMENTAL SERVICES, INC.
SUPPLEMENT NO. 1 TO PROSPECTUS DATED MARCH 3, 1998
This Prospectus Supplement is provided by Eastern Environmental Services,
Inc., a Delaware corporation (the "Company"), to supplement the section "Risk
Factors" beginning on page 5 of the Company's Prospectus dated March 3, 1998
and included in the Company's Registration Statement on Form S-4 (Registration
No. 333-37845) as filed with the Securities and Exchange Commission (the
"Prospectus"). Thus, the section "Risk Factors" contained in the Prospectus is
hereby supplemented by adding the risk factors set forth below. To the extent
any risk factor contained in this Prospectus Supplement conflicts with or
supersedes any risk factor contained in the accompanying Prospectus, the risk
factor in this Prospectus Supplement shall control.
RISKS ASSOCIATED WITH COMPLETING PENDING ACQUISITIONS
The Company has entered into definitive agreements to acquire
additional waste management businesses, the completion of which are subject
to customary closing conditions, including due diligence and the
requirements of obtaining certain governmental and other third party
consents. No assurance can be given that the closing conditions will be
satisfied or that the parties will be able to obtain such governmental and
other third party consents. Accordingly, there can be no assurance that
any of these pending acquisitions will occur.
HISTORY OF LOSSES; WORKING CAPITAL DEFICITS; CONTINUING CHARGES
The Company has reported net losses in prior fiscal years, including a
net loss to common stockholders of approximately $2.8 million (including
$3.0 million in unusual items principally related to the Company's June
1996 change of control) during the fiscal year ended June 30, 1996.
Additionally, the Company has reported working capital deficits, including
$0.5 million and $1.6 million at June 30, 1997 and 1996, respectively. In
connection with the financing of its acquisitions and business growth, the
Company has incurred, and anticipates that it will continue to incur,
significant debt and interest charges under its revolving credit facility.
In addition, the Company will continue to recognize a significant amount of
goodwill amortization charges in connection with its acquisitions of
collection and transportation businesses and transfer stations that are
accounted for under the "purchase" method of accounting. Such goodwill is
amortized over a period not to exceed 40 years depending on the business
acquired, resulting in an annual non-cash charge to earnings during that
period. As the Company continues to pursue its acquisition program, its
financial position and results of operations may fluctuate significantly
from period to period.
LIMITED OPERATING HISTORY IN REGARD TO SIGNIFICANT ASSETS
The Company's acquisition of solid waste collection, transportation
and disposal businesses from July 1, 1996 through March 31, 1998
contributed approximately $139 million or 95% of the Company's revenues for
the fiscal year ended June 30, 1997 and approximately
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$158 million or 86% of the Company's assets at June 30, 1997. Because of
the Company's relatively limited operating history with respect to these
recently acquired businesses, no assurances can be given that the Company
will be able to replicate or improve upon their historical financial
performance.
POTENTIAL PENNSYLVANIA LANDFILL RESTRICTIONS
One of the Company's Pennsylvania landfill operations, acquired by the
Company in December 1996, has been in existence since 1972. From 1972 to
1988, the 110-acre area of the landfill which received waste or was
authorized by state permits to receive waste had either received all
necessary local zoning approvals or was not required by local ordinance to
receive a zoning permit or other approval to operate. In 1988, the Company
received a state expansion permit for a 32-acre lined expansion area
increasing the size of the permitted disposal area to 142 acres as well as
conditional use zoning approval from the local township. However, in 1990,
the township adopted a new zoning ordinance which limited the height of
municipal waste landfills to 35 feet above the original land contour. The
landfill, as permitted in 1988 and as currently designed and permitted,
exceeds the height limit in certain areas. The Company has maintained that
the current permitted area is an existing nonconforming use and is not
subject to the 35 foot height limitation imposed by the 1990 ordinance. If
the township seeks to impose this limitation, and is successful, the
existing permitted capacity of the landfill would be materially reduced
resulting in significant costs to the Company.
KENTUCKY LANDFILL OBLIGATIONS
The Company ceased operations at its Kentucky landfill on June 30,
1995 because the existing permitted disposal area did not meet current
state law design requirements. From June 30, 1995 to June 30, 1996, the
Company operated a transfer station at the landfill site and disposed of
waste at an alternate location. The Company simultaneously pursued a final
state permit for an expansion area designed to meet the new state
standards. The suspension of landfill operations and the diversion of
waste to an alternate location had an adverse effect on the Company's
operating results and the Company discontinued its transfer station
operation on July 1, 1996. On July 1, 1997, the Company recommenced
operation of its transfer station to fulfill the obligations of the
disposal franchise until the Company's expansion area is completed. The
Company received a final permit to construct its expansion area on October
14, 1996 (reissued February 26, 1997). The final permit issued for the
Kentucky landfill expansion area incorporated the requirements contained in
an October 8, 1996 Agreed Order which settled an administrative appeal
filed by the Somerset Pulaski County Concerned Citizens Group. Prior to
actual construction of the expansion area, the Company is required to
complete an additional hydrogeologic investigation to confirm the adequacy
of the groundwater monitoring program approved in the final permit. These
studies are complete and indicate that the groundwater monitoring program
is adequate. The Company, however, has not yet received final approval
from the state regulatory authority with respect to the final permit.
POTENTIAL INADEQUACY OF ACCRUALS FOR CLOSURE AND POST-CLOSURE COSTS
The Company has material financial obligations relating to closure and
post-closure costs of the landfills it operates. While the precise amounts
of these future obligations cannot
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be determined, the Company estimated the total costs to be approximately
$27.8 million for final closure of its landfills, of which $8.5 million had
been accrued at March 31, 1998. The Company makes an accrual for these
costs based on consumed airspace in relation to management's estimate of
total available airspace of the landfills. Post-closure monitoring costs
pursuant to applicable regulations (generally for a term of 30 to 40 years
after final closure) are estimated at $17.1 million. At March 31, 1998, the
Company had accrued $5.5 million for such projected post-closure costs. The
Company will provide additional accruals based on engineering estimates of
consumption of permitted landfill airspace over the useful lives of its
landfills. There can be no assurance that the Company's ultimate financial
obligations for actual closing or post-closing costs will not exceed the
amount then accrued and reserved or amounts otherwise receivable pursuant
to insurance policies or trust funds. Such a circumstance could have a
material adverse effect on the Company's business and results of
operations.
YEAR 2000 DISCLOSURE
Currently, there is significant uncertainty regarding the impact of
the Year 2000 on information systems such as those used by the Company.
The Company does not currently believe that the effects of any Year 2000
non-compliance on the Company's information systems should have any
material adverse impact on the Company's business or results of operations;
however, there can be no assurance that the Company will not incur expenses
or experience business disruption as a result of system problems associated
with the century change.
Dated: June 3, 1998
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