<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (date of earliest event reported): September 12, 1996
USA WASTE SERVICES, INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-12154
-------
DELAWARE 73-1309529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 LBJ FREEWAY, SUITE 300 - TOWER ONE
DALLAS, TEXAS 75240
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 383-7900
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Condensed Consolidated Financial Statements
The pro forma condensed consolidated financial statements of USA Waste
Services, Inc. and subsidiaries (the "Company") listed below present the pro
forma balance sheet as if the acquisitions which occurred after June 30, 1996
were consummated as of that date, and pro forma results of operations as if
1996 acquisitions had occured on January 1, 1995. The pro forma condensed
consolidated balance sheet is as of June 30, 1996. The pro forma condensed
consolidated statements of operations are for the six months ended June 30,
1996 and for the year ended December 31, 1995.
(b) Exhibits
23.1 Consent of Independent Auditors
23.2 Consent of Independent Accountants
23.3 Consent of Independent Auditors
23.4 Consent of Independent Auditors
23.5 Consent of Independent Auditors
23.6 Consent of Independent Public Accountants
23.7 Consent of Independent Auditors
2
<PAGE> 3
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 7. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Pro Forma Condensed Consolidated Balance Sheet (unaudited) as of June 30, 1996 . . . . . . . . . . . . . . 6
Pro Forma Condensed Consolidated Statement of Operations
(unaudited) for the six months ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 7
Pro Forma Condensed Consolidated Statement of Operations
(unaudited) for the year ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . 9
Financial Statements of Businesses Acquired:
Acquired Quebec Solid Waste Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transport Sanico Lte'e:
Auditors' Report
Statement of Earnings and Retained Earnings for the Year ended December 31, 1995
Balance Sheet as of December 31, 1995
Statement of Changes in Financial Position for the Year Ended December 31, 1995
Notes to Financial Statements
Les Entreprises De Rebuts Sanipan Inc.:
Auditors' Report
Statement of Earnings and Retained Earnings for the Year ended December 31, 1995
Balance Sheet as of December 31, 1995
Statement of Changes in Financial Position for the Year Ended December 31, 1995
Notes to Financial Statements
Acquired Michigan and Ontario Solid Waste Companies . . . . . . . . . . . . . . . . . . . . . . . 22
Report of Independent Accountants
Historical Summary of Revenues and Direct Expenses for the year ended December 31, 1995
Notes to Historical Summary of Revenues and Direct Expenses
Report of Independent Accountants
Historical Summary of Net Book Value of Property, Plant and Equipment
Notes to Historical Summary of Net Book Value of Property, Plant and Equipment
Kasper Brothers, Inc. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Report of Independent Accountants
Balance Sheet as of September 30, 1995
Statement of Operations and Retained Earnings for the year ended September 30, 1995
Statement of Cash Flows for the year ended September 30, 1995
Notes to Financial Statements
Arnoni Group Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Report of Independent Auditors
Combined Balance Sheet as of December 31, 1995
Combined Statement of Income and Retained Earnings for the year ended December 31, 1995
Notes to Combined Financial Statements
Jennings Environmental Services, Inc. Financial Statements. . . . . . . . . . . . . . . . . . . . 50
Independent Auditors' Report
Balance Sheet as of December 31, 1995
Statement of Income for the year ended December 31, 1995
Statement of Changes in Stockholders' Equity for the year ended December 31, 1995
Statement of Cash Flows for the year ended December 31, 1995
Notes to Financial Statements
Grand Central Sanitation, Inc. and Related Companies. . . . . . . . . . . . . . . . . . . . . . . 62
Independent Auditors' Report
Combined Balance Sheet as of December 31, 1995
Combined Statement of Income for the year ended December 31, 1995
Combined Statement of Stockholders' Equity for the year ended December 31, 1995
Combined Statement of Cash Flows for the year ended December 31, 1995
Notes to Combined Financial Statements
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
Garnet Group Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Report of Independent Public Accountants
Combined Balance Sheet as of December 31, 1995
Combined Statement of Operations for the year ended December 31, 1995
Combined Statement of Stockholders' Deficit for the year ended December 31, 1995
Combined Statement of Cash Flows for the year ended December 31, 1995
Notes to Combined Financial Statements
Orange Group Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Report of Independent Auditors
Combined Balance Sheet as of December 31, 1995
Combined Statement of Operations for the year ended December 31, 1995
Combined Statement of Retained Earnings for the year ended December 31, 1995
Combined Statement of Cash Flows for the year ended December 31, 1995
Notes to Combined Financial Statements
Combined Companies (City, Alpine, and LGI) Financial Statements . . . . . . . . . . . . . . . . . . 108
Report of Independent Public Accountants
Combined Balance Sheet as of December 31, 1995
Combined Statement of Operations for the year ended December 31, 1995
Combined Statement of Stockholders' Equity and Partners' Capital for the year ended
December 31, 1995
Combined Statement of Cash Flows for the year ended December 31, 1995
Notes to Combined Financial Statements
</TABLE>
4
<PAGE> 5
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During 1996, USA Waste Services, Inc. (the "Company") acquired several
waste collection businesses and landfills, at various dates, as described in
Notes 2 and 16 to the 1995 Supplemental Consolidated Financial Statements and
Notes 1 and 5 to the 1996 Supplemental Interim Condensed Consolidated Financial
Statements included in the Company's Current Report on Form 8-K dated
November 12, 1996, filed in connection with the acquisition of Sanifill, Inc.
(the "Supplemental Financial Statements"). For those acquisitions accounted for
under the pooling of interests method, the financial statements of the acquired
companies are included with the Supplemental Financial Statements at their
historical amounts, and, if material, all periods presented are restated as if
the combination occurred on the first day of the earliest year presented. For
acquisitions accounted for as purchases, the financial statements of the
businesses acquired are included with the Supplemental Financial Statements
since the date of the acquisitions.
The accompanying pro forma condensed consolidated balance sheet as of
June 30, 1996 has been prepared as if the acquisitions which occurred after June
30, 1996 were consummated as of that date. The accompanying pro forma condensed
consolidated statements of operations for the year ended December 31, 1995 and
for the six month period ended June 30, 1996 present the pro forma results of
operations of the Company as if the 1996 acquisitions had occurred on January 1,
1995. The accompanying pro forma condensed consolidated financial statements
should be read in conjunction with the Supplemental Financial Statements.
5
<PAGE> 6
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share and Par Value Amounts)
(Unaudited)
June 30, 1996
<TABLE>
<CAPTION>
BUSINESSES
ACQUIRED
AFTER
SUPPLEMENTAL JUNE 30, 1996
(NOTE 1) (NOTE 2) PRO FORMA
------------ -------------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 34,626 ($11,787) $ 22,839
Accounts receivable, net 176,422 1,254 177,676
Notes and other receivables 14,343 -- 14,343
Deferred income taxes 38,870 -- 38,870
Prepaid expenses and other 39,333 213 39,546
----------- ---------- -----------
Total current assets 303,594 (10,320) 293,274
----------- ---------- -----------
Notes and other receivables 28,937 -- 28,937
Property and equipment, net 1,586,353 97,139 1,683,492
Excess of cost over net assets of acquired
business, net 278,494 132,623 411,117
Other intangible assets, net 63,185 6,127 69,312
Other assets 117,332 2,386 119,718
----------- ---------- -----------
Total assets $ 2,377,895 $ 227,955 $ 2,605,850
----------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 73,154 426 $ 73,580
Accrued liabilities 93,170 3,045 96,215
Deferred revenues 15,853 374 16,227
Current maturities of long-term debt 24,766 2,863 27,629
----------- ---------- -----------
Total current liabilities 206,943 6,708 213,651
----------- ---------- -----------
Long-term debt 928,147 108,758 1,036,905
Closure, post-closure, and other liabilities 167,812 25,166 192,978
Deferred income taxes 28,845 29,400 58,245
----------- ---------- -----------
1,331,747 170,032 1,501,353
----------- ---------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock: $1.00 par value; 10,000,000 shares
authorized; none issued -- -- --
Common stock: $.01 par value; 150,000,000 shares
authorized; historical 134,289,891 shares
(137,184,979 pro forma shares) issued and
outstanding 1,343 29 1,372
Additional paid-in capital 1,167,105 59,444 1,226,549
Retained earnings (accumulated deficit) (107,170) (1,352) (108,522)
Foreign currency translation adjustment (14,646) -- (14,646)
Less treasury stock at cost, 23,485 shares (484) (198) (682)
----------- ---------- -----------
Total stockholders' equity 1,046,148 57,923 1,104,071
----------- ---------- -----------
Total liabilities and stockholders' equity $ 2,377,895 $ 227,955 $ 2,605,850
=========== ========== ===========
</TABLE>
NOTE 1 The supplemental consolidated balance sheet will become the historical
consolidated balance sheet of the Company after financial statements
covering the date of consummation of the Sanifill, Inc. merger
(August 30, 1996) are issued.
NOTE 2 To reflect the historical balance sheet for acquisitions accounted for
as poolings of interests and the purchase price allocations for
acquisitions accounted for as purchases.
See notes to pro forma condensed consolidated financial statements.
6
<PAGE> 7
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
For the Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
BUSINESSES BUSINESSES
ACQUIRED ACQUIRED
THROUGH AFTER
JUNE 30, JUNE 30,
SUPPLEMENTAL 1996 1996 PRO FORMA
(NOTE 1) (NOTE 2) (NOTE 3) ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 610,267 $ 28,513 $ 42,711 $ -- $ 681,491
---------- ----------- ----------- --------- ----------
Costs and expenses:
Operating 336,211 15,739 12,530 -- 364,479
General and administrative 76,853 4,252 4,218 -- 85,323
Depreciation and amortization 69,804 3,745 2,986 -- 76,536
Merger costs 38,100 -- -- -- 38,100
Unusual items 12,952 -- -- -- 12,952
---------- ----------- ----------- --------- ----------
533,920 23,736 19,734 -- 577,390
---------- ----------- ----------- --------- ----------
Income from operations 76,347 4,777 22,977 -- 104,100
---------- ----------- ----------- --------- ----------
Other income (expense):
Interest expense (22,457) (3,024) (9,641) -- (35,122)
Interest income 2,998 96 128 -- 3,222
Other income, net 2,542 (38) 47 -- 2,552
---------- ----------- ----------- --------- ----------
(16,917) (2,966) (9,465) -- (29,348)
---------- ----------- ----------- --------- ----------
Income before provision for income taxes 59,430 1,811 13,511 -- 74,752
Provision for income taxes 33,846 721 5,469 (61)(a) 39,975
---------- ----------- ----------- --------- ----------
Net income $ 25,584 $ 1,091 $ 8,042 $ 61 $ 34,778
========== =========== =========== ========= ==========
Earnings per common share $ 0.19 $ 0.25
========== ==========
Weighted average number of common and
common equivalent shares outstanding 135,790 1,375 2,895 140,060
========== =========== =========== =========== ==========
</TABLE>
NOTE 1 The supplemental consolidated statement of operations will become the
historical consolidated statement of operations of the Company after
financial statements covering the date of consummation of the
Sanifill, Inc. merger (August 30, 1996) are issued.
NOTE 2 To reflect the revenues and expenses of businesses acquired during 1996
for the periods from January 1, 1996 through the dates of acquisition.
NOTE 3 To reflect the revenues and expenses of businesses acquired subsequent
to June 30, 1996 for the six months ended June 30, 1996.
See notes to pro forma condensed consolidated financial statements.
7
<PAGE> 8
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
AUDITED OTHER
BUSINESSES BUSINESSES
ACQUIRED ACQUIRED
AFTER AFTER
SUPPLEMENTAL DECEMBER 31, DECEMBER 31, PRO FORMA
(NOTE 1) 1995 1995 ADJUSTMENTS PRO FORMA
---------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 987,705 $ 127,054 $ 96,090 $ -- $ 1,210,849
Costs and expenses:
Operating 551,305 81,778 53,147 -- 686,230
General and administrative 140,051 24,377 14,730 -- 179,158
Depreciation and amortization 119,570 13,225 8,340 -- 141,135
Merger costs 25,639 -- -- -- 25,639
Unusual items 4,733 -- -- -- 4,733
---------- ---------- --------- -------- ------------
841,298 119,380 76,217 -- 1,036,895
---------- ---------- --------- -------- ------------
Income from operations 146,407 7,674 19,873 -- 173,954
Other income (expense):
Interest expense:
Nonrecurring (10,994) -- -- -- (10,994)
Other (48,558) (4,549) (6,421) -- (59,528)
Interest income 5,482 325 325 -- 6,132
Other income, net 5,143 (1,728) 323 -- 3,738
---------- ---------- --------- -------- ------------
(48,927) (5,952) (5,773) -- (60,652)
---------- ---------- --------- -------- ------------
Income before provision for income taxes 97,480 1,722 14,100 -- 113,302
Provision for income taxes 44,992 787 1,752 3,788 (a) 51,319
---------- ---------- --------- -------- ------------
Net income $ 52,488 $ 935 $ 12,348 $ (3,788) $ 61,983
========== ========== ========= ======== ============
Earnings per common share $ 0.46 $ 0.52 (b)
========== ============
Weighted average number of common and
common equivalent shares outstanding 113,279 847 114 5,303 (b) 119,543
========== ========== ========= ======== ============
</TABLE>
NOTE 1 The supplemental consolidated statement of operations will become the
historical consolidated statement of operations of the Company after
financial statements covering the date of consummation of the
Sanifill, Inc. merger (August 30, 1996) are issued.
See notes to pro forma condensed consolidated financial statements.
8
<PAGE> 9
USA WASTE SERVICES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying pro forma condensed consolidated financial statements
for the Company have been prepared based upon certain pro forma adjustments to
the Supplemental Financial Statements. These pro forma adjustments are
described below:
(a) Provision for income taxes reflects the corporate income tax rate
of 40% for all acquired businesses.
(b) Pro forma earnings per common share for each period is based on the
combined weighted average number of shares outstanding (considering pro forma
shares issued by the Company in connection with the acquisitions).
9
<PAGE> 10
SAMSON BeLAIR/DELOITTE & TOUCHE, S.E.N.C.
CHARTERED ACCOUNTANTS
1, Place Ville-Marie Telephone: (514) 393-7115
Suite 3000 Facsimile: (514) 393-7140
Montreal, Quebec H3B 4T9
AUDITORS' REPORT
To the Directors of
Transport Sanico Ltee
We have audited the balance sheet of Transport Sanico Ltee as at December 31,
1995 and the statements of earnings and retained earnings and of changes in
financial position for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and the changes in its financial position for the
year then ended in accordance with generally accepted accounting principles in
Canada.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Montreal, Quebec
October 25, 1996
10
<PAGE> 11
TRANSPORT SANICO LTEE
STATEMENT OF EARNINGS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
======================================================================
1995 1994
- ----------------------------------------------------------------------
$ $
(unaudited)
REVENUE 6,638,214 6,658,879
Operating expenses 4,020,825 4,264,678
- ----------------------------------------------------------------------
Gross margin 2,617,389 2,394,201
- ----------------------------------------------------------------------
Sales and administrative expenses 3,153,346 1,605,090
Amortization of capital assets 5,024 5,479
- ----------------------------------------------------------------------
3,158,370 1,610,569
- ----------------------------------------------------------------------
(Loss) earnings before income taxes (540,981) 783,632
Income taxes
Current (recovery) (197,608) 298,207
Deferred 768 3,869
- ----------------------------------------------------------------------
(196,840) 302,076
- ----------------------------------------------------------------------
Net (loss) earnings (344,141) 481,556
Retained earnings, beginning of year 2,655,763 2,174,207
- ----------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR 2,311,622 2,655,763
======================================================================
11
<PAGE> 12
TRANSPORT SANICO LTEE
BALANCE SHEET
AS AT DECEMBER 31, 1995
======================================================================
1995 1994
- ----------------------------------------------------------------------
$ $
(unaudited)
ASSETS
Current assets
Cash 1,545,665 1,128,048
Accounts receivable 318,263 285,052
Prepaid advances and deposits 158,462 70,490
Advances to affiliated companies 1,858,208 1,892,590
Income taxes 464,238 -
- ----------------------------------------------------------------------
4,344,836 3,376,180
Capital assets (Note 3) 19,785 28,013
Other assets - 77,600
- ----------------------------------------------------------------------
4,364,621 3,481,793
======================================================================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 799,142 460,894
Advances from affiliated companies 1,251,744 326,364
Income taxes - 37,427
Deferred income taxes 2,013 1,245
- ----------------------------------------------------------------------
2,052,899 825,930
- ----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 100 100
Retained earnings 2,311,622 2,655,763
- ----------------------------------------------------------------------
2,311,722 2,655,863
- ----------------------------------------------------------------------
4,364,621 3,481,793
======================================================================
12
<PAGE> 13
TRANSPORT SANICO LTEE
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEAR ENDED DECEMBER 31, 1995
======================================================================
1995 1994
- ----------------------------------------------------------------------
$ $
(unaudited)
OPERATING ACTIVITIES
Cash provided by operations
Net (loss) earnings (344,141) 481,556
Items not affecting cash
Amortization of capital assets 5,024 5,479
Gain on sale - 3,869
Deferred income taxes 768 -
- ----------------------------------------------------------------------
(338,349) 490,904
Changes in non-cash working capital items 675,162 455,787
- ----------------------------------------------------------------------
336,813 946,691
- ----------------------------------------------------------------------
INVESTING ACTIVITIES
Other assets 77,600 92,577
Proceeds on disposal of capital assets 3,204 5,321
- ----------------------------------------------------------------------
80,804 97,898
- ----------------------------------------------------------------------
Net change in cash 417,617 1,044,589
Cash, beginning of year 1,128,048 83,459
- ----------------------------------------------------------------------
CASH, END OF YEAR 1,545,665 1,128,048
======================================================================
13
<PAGE> 14
TRANSPORT SANICO LTEE
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEAR ENDED DECEMBER 31, 1995
================================================================================
1. STATUS AND NATURE OF ACTIVITIES
The Company is incorporated under the Canada Business Corporations Act, and
is wholly-owned by Intersan Inc. Its main operations are the picking-up and
transportation of waste.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting
principles generally accepted in Canada. They have been prepared for filing
with the United States Securities and Exchange Commission.The significant
accounting policies are as follows:
Revenue recognition
Contract revenues are accounted for when services are rendered.
Capital assets
Capital assets are recorded at acquisition cost and are amortized over
their estimated useful lives using the following methods, rates and terms:
Method Rate/term
------ ---------
Equipment diminishing balance 20%
Office furniture diminishing balance 20%
Automotive equipment straight-line 5 to 10 years
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
1995 1994
------------------------------ -----------
Accumulated Net Book Net Book
Cost Amortization Value Value
------ ------------ -------- -----------
$ $ $ $
<S> <C> <C> <C> <C>
(unaudited)
Equipment 56,231 40,104 16,127 23,845
Office furniture 18,358 16,826 1,532 2,126
Automotive equipment 7,089 4,963 2,126 2,042
-----------------------------------------------------------------
81,678 61,893 19,785 28,013
=================================================================
</TABLE>
14
<PAGE> 15
TRANSPORT SANICO LTEE
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEAR ENDED DECEMBER 31, 1995
================================================================================
4. SHARE CAPITAL
Authorized
An unlimited number of preferred shares, non-voting, without par value
An unlimited number of common shares, without par value
<TABLE>
<CAPTION>
1995 1994
---------------------
$ $
<S> <C> <C>
Issued
100 common shares 100 100
============================================================================
</TABLE>
5. RELATED PARTY TRANSACTIONS
During the year, sales and administrative expenses included management fees
for an amount of $1,000,000 (nil in 1994) payable to the parent company.
15
<PAGE> 16
SAMSON BeLAIR/DELOITTE & TOUCHE, S.E.N.C.
CHARTERED ACCOUNTANTS
1, Place Ville-Marie Telephone: (514) 393-7115
Suite 3000 Facsimile: (514) 393-7140
Montreal, Quebec H3B 4T9
AUDITORS' REPORT
To the Directors of Les entreprises de rebuts Sanipan Inc.
We have audited the balance sheet of Les entreprises de rebuts Sanipan Inc. as
at December 31, 1995 and the statements of earnings, retained earnings and
changes in financial position for the year then ended. The scope of these
financial statements is described in Note 7 to the financial statements. 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
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and the changes in its financial position, as
described in Note 7, for the year then ended, in accordance with generally
accepted accounting principles in Canada.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Montreal, Quebec
October 25, 1996
16
<PAGE> 17
LES ENTREPRISES DE REBUTS SANIPAN INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
===============================================================================
1995 1994
- -------------------------------------------------------------------------------
$ $
(unaudited)
<S> <C> <C>
SALES 9,698,011 10,254,600
Operating expenses 7,108,132 6,867,768
- -------------------------------------------------------------------------------
Gross margin 2,589,879 3,386,832
- -------------------------------------------------------------------------------
Sales and administrative expenses 2,187,376 1,773,221
Write-down of investments 1,077,161 --
Amortization of capital assets 825,208 450,645
- -------------------------------------------------------------------------------
4,089,745 2,223,866
- -------------------------------------------------------------------------------
Earnings before income taxes (1,499,866) 1,162,966
- -------------------------------------------------------------------------------
Income taxes
Current recovery (258,000) (13,264)
Deferred 293,000 442,435
- -------------------------------------------------------------------------------
35,000 429,171
- -------------------------------------------------------------------------------
Net earnings (1,534,866) 733,795
Retained earnings, beginning of year 3,600,522 2,866,727
- -------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR 2,065,656 3,600,522
===============================================================================
</TABLE>
17
<PAGE> 18
LES ENTREPRISES DE REBUTS SANIPAN INC.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
================================================================================
1995 1994
- --------------------------------------------------------------------------------
$ $
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash -- 17,186
Accounts receivable 117,595 96,594
Advances to affiliated companies 2,350,526 2,513,706
Inventories 26,525 26,526
Prepaid expenses 111,617 19,402
Income taxes 441,594 57,744
- --------------------------------------------------------------------------------
3,047,857 2,731,158
Investment, at cost (Note 4) -- 1,077,161
Capital assets (Note 5) 10,588,894 7,569,276
Other assets -- 185,103
- --------------------------------------------------------------------------------
13,636,751 11,562,698
- --------------------------------------------------------------------------------
LIABILITIES
Current liabilities
Bank indebtedness 1,300,536 --
Accounts payable and accrued liabilities 1,220,574 1,226,872
Advances from affiliated companies 7,755,884 6,095,134
- --------------------------------------------------------------------------------
10,276,994 7,322,006
Provision for post-closure costs 444,000 --
Deferred income taxes 849,101 639,170
- --------------------------------------------------------------------------------
11,570,095 7,961,176
- --------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Share capital (Note 6) 1,000 1,000
Retained earnings 2,065,656 3,600,522
- --------------------------------------------------------------------------------
2,066,656 3,601,522
- --------------------------------------------------------------------------------
13,636,751 11,562,698
================================================================================
</TABLE>
18
<PAGE> 19
LES ENTREPRISES DE REBUTS SANIPAN INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
================================================================================
1995 1994
- --------------------------------------------------------------------------------
$ $
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Cash provided by operations
Net earnings (1,534,866) 733,795
Items not affecting cash
Amortization 825,208 450,645
Write-down of investments 1,077,161 --
Post closure costs 444,000 --
Deferred income taxes 209,931 367,172
(Gain) loss on sale of equipment 19,916 (313)
- --------------------------------------------------------------------------------
1,041,350 1,551,299
Changes in non-cash working capital items 1,320,567 1,224,002
- --------------------------------------------------------------------------------
2,361,917 2,775,301
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to capital assets (3,959,493) (2,916,473)
Proceeds on disposal of capital assets 94,751 280
Decrease in outstanding loan from parent 185,103 22,346
- --------------------------------------------------------------------------------
(3,679,639) (2,893,927)
- --------------------------------------------------------------------------------
Net change in cash (1,317,722) (118,626)
Cash, beginning of year 17,186 135,812
- --------------------------------------------------------------------------------
CASH (BANK INDEBTEDNESS), END OF YEAR (1,300,536) 17,186
================================================================================
</TABLE>
19
<PAGE> 20
LES ENTREPRISES DE REBUTS SANIPAN INC.
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
================================================================================
1. BASIS OF PRESENTATION
The financial statements of Les Entreprises de Rebuts Sanipan Inc. are
prepared for the purpose of complying with the rules and regalations of
the Securities and Exchange Commission (for inclusion in the current
report on form 8K/A of USA Waste Services Inc.) and reflect the operations
of the company with the exclusion of the subsidiaries, since the
subsidiaries are not part of the sale agreement to USA Waste Services.
2. STATUS AND NATURE OF ACTIVITIES
The Company is incorporated under the Canada Business Corporations Act.
The Company is held 100% by Intersan Inc. and its principal activity is
the operation of a landfill site.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting
principles generally accepted in Canada. The significant accounting
policies are:
Investment
The investment in the subsidiaries is recorded at acquisition cost.
Capital assets
Capital assets are reported at cost and amortization is based on their
estimated useful life at the following annual rates and terms:
Method Rate/term
Building declining balance 5%
Automotive equipment straight-line 5 to 10 years
Machinery and equipment declining balance 20%
Furniture and fixtures declining balance 20%
Leasehold improvements straight-line remaining lease
term
Landfill site improvements landfill utilized total capacity
Computer equipment declining balance 20%
4. INVESTMENT, AT COST
1995 1994
-------------------
$ $
(unaudited)
Shares of Sablix Inc., wholly-owned subsidiary -- 15,000
Shares of 2842-7979 Quebec Inc., wholly-owned subsidiary -- 1,062,161
- --------------------------------------------------------------------------------
-- 1,077,161
================================================================================
20
<PAGE> 21
LES ENTREPRISES DE REBUTS SANIPAN INC.
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED DECEMBERR 31, 1995
================================================================================
5. CAPITAL ASSETS
<TABLE>
<CAPTION>
1995 1994
------------------------------------- ----------
Accumulated
Depreciation
and Net Book Net Book
Cost Amortization Value Value
---------- -------------- -------- ----------
$ $ $ $
(unaudited)
<S> <C> <C> <C> <C>
Land 985,075 -- 985,075 985,075
Building 173,575 47,061 126,514 132,078
Automotive equipment 60,278 3,766 56,512 12,236
Machinery and
equipment 2,214,466 141,663 2,072,803 272,364
Landfill site
improvements 9,165,664 1,827,851 7,337,813 6,154,166
Computer equipment 16,370 6,193 10,177 13,357
- -----------------------------------------------------------------------------
12,615,428 2,026,534 10,588,894 7,569,276
=============================================================================
</TABLE>
SHARE CAPITAL
Authorized
An unlimited number of preferred shares, non-cumulative dividend at
12%, redeemable by the Company at an amount equal to the paid-up
capital, without par value
An unlimited number of common shares, voting, without par value
<TABLE>
<CAPTION>
1995 1994
-----------------------------
$ $
(unaudited)
<S> <C> <C>
Issued
100 common shares 1,000 1,000
================================================================================
</TABLE>
7. RELATED PARTY TRANSACTIONS
During the year, sales and administrative expenses included management fees
for an amount of $640,000 ($1,000,000 in 1994) payable to the parent
company.
21
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors of
USA Waste Services, Inc.
We have audited the accompanying historical summary of the net book value of
property, plant and equipment of the Combined Ontario and Michigan Operations
of the Solid Waste Division of Philip Environmental Inc. for the year ended
December 31, 1995. This historical summary is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
historical summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the historical summary is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the historical summary. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying historical summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange commission (for
inclusion in the Current Report on Form 8K/A of USA Waste Services, Inc.) and
is not intended to be a complete presentation of the net book value of
property, plant and equipment of the Combined Ontario and Michigan Operations
of the Solid Waste Division of Philip Environmental Inc.
In our opinion, the historical summary referred to above presents fairly, in
all material respects, the net book value of property, plant and equipment
described in Note 1 to the Combined Ontario and Michigan Operations of the
Solid Waste Division of Philip Environmental Inc. for the year ended December
31, 1995 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Mississauga, Ontario
November 8, 1996
22
<PAGE> 23
COMBINED ONTARIO AND MICHIGAN OPERATIONS OF
THE SOLID WASTE DIVISION OF PHILIP ENVIRONMENTAL INC.
HISTORICAL SUMMARY OF THE NET BOOK VALUE OF
PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1995
(ALL AMOUNTS ARE EXPRESSED IN '000S OF U.S. DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1995
----
<S> <C>
Net book value $ 21,480
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the Historical Summary of the
Net Book Value of Property, Plant and Equipment.
23
<PAGE> 24
COMBINED ONTARIO AND MICHIGAN OPERATIONS OF
THE SOLID WASTE DIVISION OF PHILIP ENVIRONMENTAL INC.
NOTES TO THE HISTORICAL SUMMARY OF THE NET BOOK VALUE OF
PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Combined Ontario and Michigan Operations of the Solid Waste Division of
Philip Environmental Inc. (the "Company") included the assets of the
following locations and entities:
Blackwell Road Landfill MacGregor Road Transfer
Brampton Collection/Transfer Michigan Collection
Brantford Collection Michigan Landfill
Gore Landfill Michigan Transfer
Hamilton Collection/Transfer Petrolia Landfill
K & E Waste Resource St. Catherines Collection/Transfer
The assets of the Company were acquired by USA Waste Services, Inc. on
August 24, 1996.
The historical summary of the net book value of property, plant and
equipment reflects the assets attributable to the operations of the Company
acquired by USA Waste Services, Inc.
Property, plant and equipment
Property, plant and equipment are stated at cost and are depreciated over
their estimated useful lives generally on the following basis: buildings
20 to 40 years straight-line; equipment 5% to 30% straight-line. Landfill
sites and improvements thereto are recorded at cost and amortized over the
life of the landfill site based on the estimated landfill capacity utilized
during the year. Operating costs associated with landfill sites are
charged to operations as incurred.
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors of
USA Waste Services, Inc.
We have audited the accompanying historical summary of revenues and direct
operating expenses of the Combined Ontario and Michigan Operations of the Solid
Waste Division of Philip Environmental Inc. for the year ended December 31,
1995. This historical summary is the responsibility of the Company's
management. Our responsibility is to express an opinion on the historical
summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the historical summary is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the historical summary. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying historical summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange commission (for
inclusion in the Current Report on Form 8K/A of USA Waste Services, Inc.) and
is not intended to be a complete presentation of the revenues and direct
operating expenses of the Combined Ontario and Michigan Operations of the Solid
Waste Division of Philip Environmental Inc.
In our opinion, the historical summary referred to above presents fairly, in
all material respects, the revenues and direct operating expenses described in
Note 1 to the Combined Ontario and Michigan Operations of the Solid Waste
Division of Philip Environmental Inc. for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Mississauga, Ontario
November 8, 1996
25
<PAGE> 26
COMBINED ONTARIO AND MICHIGAN OPERATIONS OF
THE SOLID WASTE DIVISION OF PHILIP ENVIRONMENTAL INC.
NOTES TO THE HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Combined Ontario and Michigan Operations of the Solid Waste Division of
Philip Environmental Inc. (the "Company") includes the operations of the
following locations and entities:
Blackwell Road Landfill MacGregor Road Transfer
Brampton Collection/Transfer Michigan Collection
Brantford Collection Michigan Landfill
Gore Landfill Michigan Transfer
Hamilton Collection/Transfer Petrolia Landfill
K & E Waste Resource St. Catherines Collection/Transfer
The assets of the Company were acquired by USA Waste Services, Inc. on
August 24, 1996.
The historical summary of revenues and direct operating expenses reflect
the operating revenues and expenses attributable to the operations of the
Company acquired by USA Waste Services, Inc.
The historical summary of revenues and direct operating expenses excludes
management fees, other income, interest expense and income tax expense
since these items are not considered comparable to those which will be
reflected in future consolidated financial statements.
Revenues and operating expenses
Revenue from solid waste is recognized upon receipt and acceptance of waste
material. Treatment, transportation and disposal costs are accrued when
the related revenues are recognized.
The major components of expenses are cost of hauling and disposal,
depreciation, amortization, salaries and related expenses, maintenance,
insurance and selling general and administration expenses.
26
<PAGE> 27
COMBINED ONTARIO AND MICHIGAN OPERATIONS OF
THE SOLID WASTE DIVISION OF PHILIP ENVIRONMENTAL INC.
NOTES TO THE HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (CONTINUED)
Environmental liability
The Company accrues for the estimated costs relating to the closure and
post-closure monitoring of its landfill sites as well as remediation costs
associated with its transfer and processing facilities. The Company
charges earnings with these estimated future costs based on engineering
estimates over the fill rate of landfill sites or the expected life of
transfer and processing facilities. Amounts required to dispose of waste
materials located at the Company's transfer and processing facilities are
accrued when received.
Property, plant and equipment
Property, plant and equipment are stated at cost and are depreciated over
their estimated useful lives generally on the following basis: buildings
20 to 40 years straight-line; equipment 5% to 30% straight-line. Landfill
sites and improvements thereto are recorded at cost and amortized over the
life of the landfill site based on the estimated landfill capacity utilized
during the year. Operating costs associated with landfill sites are
charged to operations as incurred.
2. RELATED PARTY TRANSACTIONS
The Company had revenue of $7,785,000 with other Philip Environmental Inc.
operating units during the year ended December 31, 1995.
27
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Kasper Brothers, Inc.:
We have audited the accompanying balance sheet of Kasper Brothers, Inc. as of
September 30, 1995 and the related statements of operations and retained
earnings and cash flows for the fiscal year 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 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 Kasper Brothers, Inc. as of
September 30, 1995 and the results of its operations and its cash flows for the
fiscal year then ended in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 15, 1996
28
<PAGE> 29
KASPER BROTHERS, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 1995
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 36,070
Accounts receivable (net of allowance for doubtful accounts of $175,000) 2,079,676
Prepaid and other current assets 212,658
Bid bonds 91,419
-----------
Total current assets 2,419,823
Property and equipment:
Transportation equipment 4,814,516
Containers and compactors 3,431,320
Office furniture and equipment 110,025
-----------
8,355,861
Accumulated depreciation (6,628,865)
-----------
Net property and equipment 1,726,996
Other assets 27,756
-----------
Total assets $ 4,174,575
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 539,720
Accrued expenses 249,828
State corporate taxes payable 3,000
-----------
Total current liabilities 792,548
Loans payable - officers 1,518,968
-----------
Total liabilities 2,311,516
Stockholders' equity:
Common stock, $.1 stated value, 10,000 shares authorized,
issued and outstanding 1,000
Retained earnings 1,862,059
-----------
Total stockholders' equity 1,863,059
-----------
Total liabilities and stockholders' equity $ 4,174,575
===========
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 30
KASPER BROTHERS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Operating revenues $ 13,524,467
Costs and expenses:
Operating 8,410,654
General and administrative 4,577,392
Depreciation 845,923
------------
13,833,969
------------
Loss from operations (309,502)
------------
Other income (expense):
Interest expense, net (116,203)
Gain on sale of assets 2,806
------------
(113,397)
------------
Loss before taxes (422,899)
Provision for state taxes 4,000
------------
Net loss (426,899)
Retained earnings at September 30, 1994 2,288,958
------------
Retained earnings at September 30, 1995 $ 1,862,059
============
</TABLE>
See accompanying notes to financial statements.
30
<PAGE> 31
KASPER BROTHERS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(426,899)
Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Depreciation 845,923
Gain on sale of assets (2,806)
Provision for bad debts 428,743
Changes in operating assets and liabilities:
(Increase) in accounts receivable (352,697)
Decrease in prepaid and other current assets 1,813
Decrease in bid bonds 1,450
Decrease in other assets 133
Increase in accrued expenses 22,725
Increase in corporate taxes payable 3,000
Increase in accounts payable 465,322
---------
Net cash provided by operating activities 986,707
---------
Cash flows from investing activities:
Purchase of property and equipment (820,073)
Proceeds from sale of property and equipment 8,293
---------
Net cash used in investing activities (811,780)
---------
Cash flows from financing activities:
Officer loan repayments (619,832)
---------
Net cash used in financing activities (619,832)
---------
Net decrease in cash and cash equivalents (444,905)
Cash and cash equivalents at beginning of year 480,975
---------
Cash and cash equivalents at end of year $ 36,070
=========
Interest expense paid $ 128,500
=========
</TABLE>
See accompanying notes to financial statements.
31
<PAGE> 32
KASPER BROTHERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS:
Kasper Brothers, Inc., a Pennsylvania Subchapter S Corporation, was
incorporated October 1, 1992. The Company is in the business of collection,
transportation and disposal of residential, commercial and industrial
wastes and recyclables. Kasper Brothers, Inc. currently services the
Philadelphia and New Jersey area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies utilized in the preparation of the
financial statements are as follows:
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. Depreciation is computed
using accelerated methods over the estimated useful lives of the assets,
ranging from 5-7 years. Renewals and betterments that extend the economic
useful lives of the related assets are capitalized. When property is
retired or otherwise disposed of, the cost of the property and the related
accumulated depreciation are removed from the accounts and any resulting
gains or losses are reflected in current operations. Expenditures for
maintenance and repairs are charged to expense as incurred.
BID BONDS:
The Company is required to place deposits with high credit quality
financial institutions at the inception of certain contracts. The deposits
are held in certificates of deposits with Mellon Bank.
The Company has outstanding letters of credit aggregating $39,500.
32
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CONCENTRATION OF CREDIT RISK:
The Company encounters, in the normal course of business, exposure to
concentrations of credit risk with respect to trade receivables.
Concentrations of credit risk with respect to trade receivables are
limited due to the Company's large customer base. Ongoing credit
evaluations of customers' financial condition are performed and,
generally, no collateral is required. The Company maintains reserves for
potential credit losses and such losses have not exceeded management's
expectations.
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 assets and liabilities and
disclosures of contingent assets and liabilities at the financial
statement date and the reported amounts of revenues during the reporting
period. Actual results could differ from those estimates.
INCOME TAXES:
The Company has elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under such election, the Company's federal
taxable income or loss are passed through to the individual shareholders.
Therefore, no provision or liability for federal income tax has been
included in these financial statements. The Company also elected
Subchapter S status for state income tax purposes in Pennsylvania and New
Jersey.
3. RETIREMENT PLAN:
The Company has a profit sharing plan covering eligible employees. The
Plan requires a two year waiting period for an employee to become
eligible, and provides 100% immediate vesting. Company contributions are
determined as a percentage of each eligible employee's salary. The
contribution for the year ended September 30, 1995 was $222,618.
33
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. RELATED PARTY TRANSACTIONS:
The Corporation has outstanding uncollateralized loans to corporate
officers Francis Kasprzak and John Kasprzak. The total loan balance at
September 30, 1995 is $1,518,968. There are no specific repayment terms,
but interest is paid at an annual rate of 9% on the outstanding balance.
Interest expense incurred in connection with these loans was $128,500 for
the year ended September 30, 1995.
The Company rents office space in Pennsylvania from the Betsy Ross
Partnership, a related partnership. The partners are Francis Kasprzak,
John Kasprzak, and Michael Kasper, who are the shareholders of Kasper
Brothers, Inc. The lease is renewed annually. Rent expense for the year
ended September 30, 1995 was $135,000.
5. SUBSEQUENT EVENT:
In April 1996, all of the assets of Kasper Brothers, Inc. were acquired by
USA Waste Services Inc. The total purchase price was $10,676,000. In
addition to the purchase of all assets, the Company entered into a
contract not to compete and several employment contracts in the amounts of
$450,000 and $600,000, respectively.
34
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
The Arnoni Group of Companies
Pittsburgh, Pennsylvania
We have audited the accompanying combined balance sheet of The Arnoni Group
of Companies (consisting of The Arnoni Group, Inc., M.C. Arnoni Company, South
Hills Disposal Company, Cochran Mill Associates, Inc. and Arnoni Family
Partnership) as of December 31, 1995, and the related combined statement of
income and retained earnings and combined statement of cash flows for year then
ended. These combined financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
combined 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 audits 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of The Arnoni Group of
Companies as of December 31, 1995, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ KAPLAN SIPOS & ASSOCIATES
-------------------------------------
KAPLAN SIPOS & ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
Pittsburgh, Pennsylvania
March 11, 1996
35
<PAGE> 36
THE ARNONI GROUP OF COMPANIES
COMBINED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and Cash Equivalents $ 1,408,179
Accounts Receivable - Trade 1,244,742
Current Portion of Assets
Limited as to Use 365,525
Prepaid Expenses and
Other Current Assets 744,412
-----------
Total Current Assets 3,762,858
-----------
Property, Plant and Equipment 15,262,655
-----------
Other Assets:
Long-Term Investments 430,080
Escrow Funds 1,993,149
Assets Limited as to Use
Under Indenture of Trust
and Held by Trustee 1,700,000
Intangible Assets 103,776
Other Non-Current Assets 2,121,981
-----------
Total Other Assets 6,348,986
-----------
Total Assets $25,374,499
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 37
THE ARNONI GROUP OF COMPANIES
COMBINED BALANCE SHEET
DECEMBER 31, 1995
LIABILITIES AND EQUITY
<TABLE>
<S> <C>
Current Liabilities:
Accounts Payable - Trade $ 497,918
Current Portion of Long-Term Debt 1,642,706
Unearned Revenue 678,294
Accrued Landfill Closure Costs --
Other Current Liabilities 801,446
-----------
Total Current Liabilities 3,620,364
Long-Term Liabilities:
Unearned Revenue
Net of Current Portion 117,207
Accrued Landfill Closure Costs,
Net of Current Portion 4,131,241
Long-Term Debt, Net of Current
Portion 15,118,426
-----------
Total Liabilities 22,987,238
-----------
Minority Interest 1,292
-----------
Equity:
Contributed Capital 308,511
Retained Earnings 2,077,458
-----------
Total Equity 2,385,969
-----------
Total Liabilities and Equity $25,374,499
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 38
THE ARNONI GROUP OF COMPANIES
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Disposal Fees $ 13,541,456
Other Operating Income 92,828
------------
13,634,284
------------
Operating Expenses 7,255,263
Selling, General and Administrative Expenses 1,816,204
Depreciation, Depletion and Amortization 3,169,601
------------
12,241,068
------------
Income From Operations 1,393,216
Interest Expense (1,658,743)
Other Income and Expenses 367,754
------------
Net Income (Loss) Before
Minority Interest 102,227
Minority Interest 4,139
------------
Net Income (Loss) 106,366
Retained Earnings - Beginning 2,126,537
Dividends (155,445)
------------
Retained Earnings - Ending $ 2,077,458
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 39
THE ARNONI GROUP OF COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 106,366
Noncash Items Included in
Net Income:
Depreciation, Depletion and Amortization 3,342,053
Minority Interest in the Group (4,138)
Gain on Assets (20,638)
Changes In:
Accounts Receivable - Trade 236,725
Prepaid Expenses and Other
Current Assets (30,717)
Escrow Funds (217,158)
Intangible Assets (750)
Other Non-Current Assets 225,470
Accounts Payable - Trade 156,109
Accrued Landfill Closure Costs 36,508
Other Current Liabilities (122,548)
Unearned Revenue (526,067)
-----------
NET CASH FLOWS FROM
OPERATING ACTIVITIES 3,181,215
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Investing of Assets Held in Trust 32,280
Proceeds From Sale of Equipment 44,500
Property, Plant and Equipment Acquired (2,782,985)
-----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES (2,706,205)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Issuance of Long-Term Debt 1,099,880
Principal Payments on Long-Term Debt (1,403,878)
Dividends Paid (155,445)
-----------
NET CASH FLOWS FROM
FINANCING ACTIVITIES (459,443)
-----------
Net Increase in Cash and Cash Equivalents 15,567
Cash and Cash Equivalents - Beginning 1,392,612
-----------
Cash and Cash Equivalents - Ending $ 1,408,179
===========
</TABLE>
(Continued)
39
<PAGE> 40
THE ARNONI GROUP OF COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
Supplemental Disclosure of Cash Flow Information:
<TABLE>
<S> <C>
Cash Paid During the Year For:
Interest $1,670,443
==========
Income Taxes $ --
==========
Supplemental Schedule of Noncash Investing and Financing Activities:
Refinancing of Long-Term Debt Obligations $ 150,296
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE> 41
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements of The Arnoni Group of Companies are
presented on the accrual basis of accounting and are prepared in conformity
with generally accepted accounting principles. In order to facilitate the
understanding of the data included in the financial statements, summarized
below are the more significant accounting policies:
Organization
The Arnoni Group of Companies (the Group) encompasses five commonly
controlled companies operating in the non-hazardous solid waste disposal
industry. Included in the Group are The Arnoni Group, Inc., M.C. Arnoni
Company, South Hills Disposal Company, Cochran Mill Associates, Inc., and
Arnoni Family Partnership.
1. The Arnoni Group, Inc. was incorporated on December 23, 1991 and
was organized under the laws of the Commonwealth of Pennsylvania.
The Company provides management and administrative services to
its affiliated companies.
2. M.C. Arnoni Company was formed on December 9, 1960 and was
organized under the laws of the Commonwealth of Pennsylvania. The
Company is a landfill owner/operator with facilities in Allegheny
and Washington Counties, Pennsylvania.
3. South Hills Disposal Company was formed on July 18, 1949 and was
organized under the laws of the Commonwealth of Pennsylvania. The
Company provides residential and commercial waste collection
services to the metropolitan Pittsburgh, Pennsylvania area.
4. Cochran Mill Associates, Inc. was incorporated on January 25,
1991 and was organized under the laws of the Commonwealth of
Pennsylvania. The Company provides other waste industry services.
5. Arnoni Family Partnership was organized as a general partnership
under the Pennsylvania Uniform Partnership Act. The Partnership
participates in real estate and other investment activities.
Principles of Combination
The combined 1995 financial statements of the Group include the
financial position, results of operations and cash flows of The Arnoni Group,
Inc., M.C. Arnoni Company, South Hills Disposal Company Cochran Mill Associates,
Inc., and Arnoni Family Partnership. All significant intercompany accounts and
transactions have been eliminated.
41
<PAGE> 42
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates Used By Management
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amount of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
Revenue Recognition
The Group recognizes revenue at the time waste disposal services are
provided.
Amortization
Intangible assets include goodwill, organization costs, acquired
contracts, non-compete covenants and other fees. Intangible assets are presented
net of accumulated amortization of $223,730 and $467,309 in 1995 and 1994,
respectively. Amortization expense charged to operations in 1995 and 1994 was
$33,660 and $110,032, respectively.
Depreciation
The cost of property, equipment and leasehold improvements is
depreciated over the estimated useful lives of the related assets. Depreciation
is computed on the straight-line and accelerated methods for financial
reporting purposes and accelerated methods allowed under the Internal Revenue
Code for income tax purposes.
Depletion
Landfill and landfill improvement costs, which have been incurred or
estimated for the development of the entire permitted site, including
engineering and professional costs associated with landfill construction, are
depleted based upon total units of airspace filled during the year in relation
to estimated total permitted airspace capacity. Land held for future
development, outside of the currently permitted area, is excluded from
depletion.
Cash Flows
The Group considers all short-term unrestricted investments with an
original maturity of three months or less to be cash equivalents for the
statement of cash flows.
42
<PAGE> 43
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
M.C. Arnoni Company, South Hills Disposal Company, The Arnoni Group,
Inc. and Cochran Mill Associates, Inc. have elected treatment as small business
corporations (S Corporations) for federal and state income taxation purposes.
This election relieves the Companies of most federal and state income tax
liability, with income being taxable directly to the stockholders.
M.C. Arnoni Company and South Hills Disposal Company organized as
Pennsylvania business trusts effective February 28, 1993.
Bad Debts on Accounts Receivable
The Group uses the direct write-off method of recognizing bad debts, as
such amounts are normally not significant.
Concentration of Credit Risk
The Group grants credit to its customers, substantially all of whom are
either; a) located in the Pittsburgh, Pennsylvania metropolitan area or b)
involved with the waste industry.
The Group maintains balances on deposit with financial institutions at
times, such balances exceed the maximum amount of coverage provided by the
institutions' insurance programs.
Landfill Expansion Project Costs
In connection with landfill expansion plans, the Group incurs
engineering, construction and professional costs. Costs associated with
successful expansion applications are capitalized as part of the landfill site.
Accrued Landfill costs
The Group records landfill closure liabilities based upon estimates
provided by the Group's internal engineers. The expense of closure activities is
recognized ratably over the useful life of the landfill, based upon total units
of airspace filled during the year. The portion of the recognized closure
liability that is allocable to unutilized sections of the landfill has been
recorded as a deferred charge. The deferred charge will be amortized to expense,
ratably, as related portions of the landfill are utilized. Management
anticipates that in 1996 landfill permit modifications will be submitted by the
Group and if approved, significant changes in the landfill closure estimate
calculations may result.
43
<PAGE> 44
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Escrow Funds
The Pennsylvania Department of Environmental Resources requires landfill
operators to post bonds in order to operate in Pennsylvania. In addition, there
are collateral bond requirements for landfill expansion and closure obligations.
The Group has satisfied such requirements by delivering letters of credit
backed by marketable securities.
Long-Term Investments
The Group's long-term investments include investments in certain real
estate and equity securities recorded at cost, which approximate market values.
NOTE B - PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment - at cost,
less accumulated depreciation:
<TABLE>
<S> <C>
Landfill $ 18,897,540
Land 296,096
Land Improvements 101,468
Building 720,152
Office Furniture and Equipment 219,593
Machinery and Equipment 4,739,980
Transportation Equipment 4,415,796
------------
29,390,625
Less: Accumulated Depletion
and Depreciation (14,127,970)
------------
$ 15,262,655
============
</TABLE>
Depletion and depreciation expense charged to operations was $3,135,941
in 1995. Depreciation charges capitalized as part of the landfill site
construction amounted to $172,452 in 1995.
Various pieces of machinery and equipment are pledged as collateral
for loans.
44
<PAGE> 45
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE C - ASSETS LIMITED AS TO USE
Pursuant to the terms of the agreement to finance the construction of
its landfill expansion, the following funds are held in trust at December 31,
1995:
<TABLE>
<S> <C>
Debt Service Reserve Fund $ 1,743,836
Debt Service Fund 218,860
Revenue Fund 93,621
-----------
2,056,317
Accrued Interest Receivable 9,208
-----------
2,065,525
Less Assets to be Used
Within One Year (365,525)
-----------
$ 1,700,000
===========
</TABLE>
The funds held by trustee consist of the following securities which are
valued at cost at December 31, 1995:
<TABLE>
<S> <C>
U.S. Treasury Notes $1,688,578
Money Market Investments 367,739
----------
2,056,317
Accrued Interest Receivable 9,208
----------
$2,065,525
==========
</TABLE>
The fair market value of the trusteed funds approximates $2,085,793 at
December 31, 1995.
The trusteed funds were created pursuant to an indenture of trust upon
the issuance of Industrial Revenue Bonds to finance the construction of the
Group's landfill expansion. The funds were established to; a) provide a vehicle
for the payment of the principal and interest on the Group's debt obligation
arising from the bond issuance, b) provide a vehicle for the disbursement of
funds related to the construction of landfill expansion facilities, c)
accumulate and disburse funds for the Group's operations and maintenance and d)
accumulate and disburse funds for arbitrage rebate requirements.
45
<PAGE> 46
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE D- BORROWED FUNDS
Following is a summary of borrowed funds at December 31, 1995:
<TABLE>
<S> <C>
Industrial Revenue Bonds
Description: Installment Debt
Maturity Date: November 1, 2006
Interest Rate: Applicable Bond
Rate at Issue Date
Secured By: First mortgage on
landfill facilities and security
interest in unexpended funds
Repayment Terms: Annual principal
payments due and payable each November 1,
ranging from $790,000 in 1996 to
$2,010,000 in 2006 plus interest
Covenants: Provisions of the loan
agreement require the Group to
maintain certain debt covenants $14,480,000
Notes Payable - Various
Description: 21 Installment Loans
Maturity Date: Various dates
ranging from October, 1996 to
January, 2001
Interest Rate: Rates vary from
6.96% to 9.80%
Secured By: Equipment
Repayment Term: Monthly principal
and interest payments of $79,917 2,031,729
Mortgages Payable
Description: 2 Installment Loans
Maturity Date: Various dates
ranging from October, 1997 to
February, 2001
Interest Rate: Rates vary from
8.5% to 9%
Secured By: Property
Repayment Terms: Monthly principal
and interest Payments of $1,936 68,875
-----------
Subtotal $16,580,604
-----------
</TABLE>
46
<PAGE> 47
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE D - BORROWED FUNDS (CONTINUED)
<TABLE>
<S> <C>
Balance Forward $16,580,604
Note Payable - Individual
Description: Installment Loan
Maturity Date: January, 1999
Interest Rate: 8%
Secured By: Real and Personal Property
Repayment Terms: Monthly principal
and interest payments of $5,455 180,528
-----------
$16,761,132
===========
Current Portion $ 1,642,706
Long-Term Portion 15,118,426
-----------
$16,761,132
===========
</TABLE>
Following are maturities of long term debt for each of the next five
year and in the aggregate:
<TABLE>
<S> <C>
1996 $1,642,706
1997 1,556,801
1998 1,418,764
1999 1,241,895
2000 1,225,882
Thereafter 9,675,084
-----------
$16,761,132
===========
</TABLE>
At December 31, 1995, the Group had total bank commitments of $500,000
on a line of credit, of which $500,000 was available at December 31, 1995.
47
<PAGE> 48
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE E - LANDFILL CLOSURE LIABILITIES
Landfill closure activities involve monitoring and maintaining the
landfill for a twenty year period subsequent to closing of the landfill. Based
upon estimates by the Group's internal engineers, the total anticipated and
accrued landfill closure costs as of December 31, 1995 amounted to $4,131,241.
Closure obligations which are required to be satisfied within one year are
classified as a current liability in the financial statements.
The portion of the recognized closure liability that is allocable to
unutilized sections of the landfill has been recorded as a deferred charge and
included in other assets. This deferred charge amounted to $2,475,600 at
December 31, 1995. The portion of the deferred charge that is expected to be
recognized within one year is classified as a current asset in the financial
statements.
NOTE F - PENSION PLAN
The Group maintains a defined contribution pension plan that covers all
employees that meet the eligibility requirements. Pension costs are determined
at the discretion of the Board of Directors, and are accrued and funded on a
current basis. Also, the Group makes union pension contributions for employees
working under union arrangements. Pension costs amounted to $49,896 in 1995.
NOTE G - CONTRIBUTED CAPITAL
The following summarizes the Group's capitalization as of December 31,
1995:
Arnoni Group, Inc. - Common Stock; No Par Value,
10,000 Shares Authorized, Issued and outstanding.
Arnoni Family Partnership - Partners' Capital
M.C. Arnoni Company - Trust Units; No Par Value,
1,000 Shares Authorized, 530 Shares Issued and
Outstanding.
South Hills Disposal Company - Trust Units; No Par Value,
500 Shares Authorized, 100 Shares Issued and Outstanding.
Cochran Mill Associates, Inc. - Common Stock; $1 Par Value,
5,000 Shares Authorized, Issued and Outstanding.
48
<PAGE> 49
THE ARNONI GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(CONTINUED)
NOTE H - COMMITMENTS AND CONTINGENCIES
In the normal Course of business, the Group makes commitments to
complete contracts at specified rates and dates. Further, the Group has entered
into an agreement to lease a portion of it's landfill property for landfill gas
commercial processing; as well as a disposal agreement with a customer that
commits up to approximately fifteen percent (15%) of daily landfill capacity
through December, 1997.
The Group is committed to provide collateral bonding to the Pennsylvania
Department of Environmental Resources to satisfy the Department's requirements.
The Group has pledged as security for three (3) letters of credit issued to the
Department, securities having a cost which approximates fair market value of
$1,983,995 as collateral.
The Group has been named as defendant in various legal actions arising
out of the normal conduct of its business. In the opinion of management, based
on the advice of legal counsel, the suits are without merit; management intends
to vigorously defend its position.
The Group carries a wide range of insurance coverage for the protection
of the Group's assets and operations, including environmental impairment
insurance. However, in the event uninsured losses occur, the Group's net income
and financial position could be materially affected.
49
<PAGE> 50
Independent Auditors' Report
To the Board of Directors
Jennings Environmental Services, Inc.
Altamonte Springs, Florida
We have audited the accompanying balance sheet of Jennings Environmental
Services, Inc. (an S corporation) as of December 31, 1995 and the related
statements, of income and changes in stockholders' equity and the statement of
cash flows for the year 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 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 from
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 Jennings Environmental
Services, Inc. as of December 31, 1995, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ BLAKE, KUEHLER, BABIONE & POOL
Orlando, Florida
March 18, 1996
50
<PAGE> 51
JENNINGS ENVIRONMENTAL SERVICES, INC.
Balance Sheet
December 31, 1995
<TABLE>
<S> <C>
ASSETS
------
Current assets:
Cash $ 118,740
Accounts receivable, net 470,869
Employee advances 2,145
Prepaid expenses 14,209
-----------
Total current assets 605,963
-----------
Property and equipment, net 2,105,356
-----------
Other assets:
Deposits 8,763
Bonds 4,500
Loan costs, net 8,980
-----------
Total other assets 22,243
-----------
Total assets $ 2,733,562
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 179,252
Line of credit 150,000
Other payables 45,926
Loans from stockholder 175,000
Current portion of long-term debt 536,419
-----------
Total current liabilities 1,086,597
-----------
Long-term liabilities:
Long-term debt 1,015,368
Loans from stockholder 0
-----------
Total long-term liabilities 1,015,368
-----------
Total liabilities 2,101,965
-----------
Stockholders' equity:
Common stock 79,970
Additional paid-in capital 605,930
Retained earnings (deficit) (54,303)
-----------
Total stockholders' equity 631,597
-----------
Total liabilities and
stockholders' equity $ 2,733,562
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE> 52
JENNINGS ENVIRONMENTAL SERVICES, INC.
Statement of Income
For the year ended December 31, 1995
<TABLE>
<S> <C>
Revenues:
Gross revenues $ 4,598,237
Less disposal and franchise fees 1,408,126
-----------
Net revenues 3,190,111
Operating expenses 1,806,381
-----------
Income from operations
before depreciation 1,383,730
Depreciation (649,959)
-----------
Income from operations 733,771
Interest expense (179,775)
-----------
Net income $ 553,996
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE> 53
JENNINGS ENVIRONMENTAL SERVICES, INC.
Statement of Changes in Stockholders' Equity
For the year ended December 31, 1995
<TABLE>
<S> <C>
Common Stock
------------
$.10 par value, 1,000,000 shares authorized,
799,700 shares issued and outstanding at
December 31, 1995
Balance beginning of year $ 79,528
Shares issued during the year 442
---------
Balance end of year 79,970
=========
Additional Paid-in Capital
--------------------------
Balance beginning of year $ 534,972
Shares issued during the year 70,958
---------
Balance end of year $ 605,930
=========
Retained Earnings Deficit
-------------------------
Balance beginning of year,
as previously reported $(720,799)
Adjustment for understatement of
accounts receivable 112,500
---------
Balance beginning of year,
as restated (608,299)
---------
Net income 553,996
---------
Balance end of year $ (54,303)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 54
JENNINGS ENVIRONMENTAL SERVICES, INC.
Statement of Cash Flows
For the year ended December 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 553,996
-----------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 651,295
Allowance for doubtful accounts (10,000)
(Increase) decrease in accounts receivable (164,441)
(Increase) decrease in employee advances (1,145)
(Increase) decrease in prepaid expenses (14,209)
(Increase) decrease in other assets 0
Increase (decrease) in accounts payable 22,367
Increase (decrease) in other payables 44,972
-----------
Total adjustments 528,839
-----------
Net cash provided by
operating activities 1,082,835
-----------
Cash flows from investing activities:
Cash payments for the purchase of property (516,491)
-----------
Net cash used by investing activities (516,491)
-----------
Cash flows from financing activities:
Net borrowing (repayment) on stockholder loan (25,000)
Cash payments for loan costs (7,414)
Proceeds from issuance of common stock 23,800
Repayment on line of credit 0
Principal payments on long-term debt (450,197)
-----------
Net cash provided (used) by
financing activities (458,811)
-----------
Net increase in cash and equivalents 107,533
Cash and equivalents, beginning of year 11,207
-----------
Cash and equivalents, end of year $ 118,740
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE> 55
JENNINGS ENVIRONMENTAL SERVICES, INC.
Statements of Cash Flows (Continued)
December 31, 1995
<TABLE>
<S> <C>
Supplemental disclosures for cash flow information:
Cash paid during the year for:
Interest $ 158,441
===========
Schedule of noncash investing and financing activities:
Acquisition of property and equipment:
Cost of property and equipment acquired $ 1,171,693
Capital stock issued (46,600)
Long-term debt incurred (608,602)
-----------
Cash paid to acquire property and equipment $ 516,491
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE> 56
JENNINGS ENVIRONMENTAL SERVICES, INC.
Notes to Financial Statements
December 31, 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
The Company is a full service environmental services firm, collecting and
transporting waste and recyclable materials to designated sites for reuse or
disposal. The Company's operations are in the Central Florida area.
Revenue Recognition
The Company recognizes income from recycling and refuse collection as it is
earned. Prebilled amounts are not recorded until the Company performs the
service. Revenue from material resale is recognized when materials are sold.
Accounts Receivable
The Company uses the reserve method for uncollectible accounts. The allowance
for doubtful accounts was $10,000 as of December 31, 1995. Bad debt expense for
the year ended December 31, 1995 was $22,292. Customers are primarily
commercial and industrial building owners and contractors in the Central
Florida area. In the normal course of business, the Company extends unsecured
credit to its customers.
Property and Equipment
Property and equipment is recorded at cost. Property and equipment is
depreciated over the lives established by the Modified Accelerated Cost
Recovery System (MACRS), which are shorter than the estimated useful lives that
would have been used under generally accepted accounting principles. This
variance caused by using MACRS is not considered material. The estimated useful
lives of the property and equipment range from five to seven years.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
Income Taxes
The Company changed its tax status from nontaxable to taxable effective January
1, 1996. After that date, the financial statements will provide for the income
tax effect of earnings reported in the statements, including taxes currently
due and taxes deferred as different accounting methods are used for financial
and income tax reporting.
56
<PAGE> 57
JENNINGS ENVIRONMENTAL SERVICES, INC.
Notes to Financial Statements
December 31, 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
Prior to the change in tax status, the Company did not record an income tax
provision as income and losses were reported directly by the stockholders
under provisions of Subchapter S of the Internal Revenue Code.
Loan Costs
Loan closing costs. are amortized on a straight-line basis over the life of the
loan.
Concentration of Risk
The Company's cash funds are located in a single-financial institution. The
amounts on deposit at December 31, 1995 exceeded the $100,000 federally insured
limit.
Use of Estimates
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 consists of:
<TABLE>
<S> <C>
Vehicles $ 1,907,748
Roll-off containers 1,550,596
Non roll-off containers 189,959
Furniture and fixtures 24,959
Equipment 20,516
Computers and software 9,130
-----------
3,702,908
Accumulated depreciation (1,597,552)
-----------
Net property and equipment $ 2,105,356
===========
</TABLE>
57
<PAGE> 58
JENNINGS ENVIRONMENTAL SERVICES, INC.
Notes to Financial Statements
December 31, 1995
NOTE 3 -- LINE OF CREDIT
The Company has available a $300,000 line of credit, which is due on demand and
matures October 31, 2000. Interest is payable monthly at the bank's prime
lending rate. The total outstanding balance was $150,000 as of December 31,
1995. The line of credit is collateralized by certain equipment and is also
personally guaranteed by the principal stockholder.
NOTE 4 -- LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995:
<TABLE>
<S> <C>
8.25% installment notes payable to
a bank in monthly installments including
principal and interest, maturing
October 2000 as follows (see note
below):
Monthly installment of $24,205 $730,847
Monthly installment of $4,320 206,046
Monthly installment of $1,975 94,137
9.75% installment note payable to a bank
in monthly installments of $15,622
including principal and interest, secured
by transportation equipment, maturing
February 1998, refinanced in 1995 0
8.25% installment note payable to a bank
in monthly installments of $2,920
including principal and interest, secured
by transportation equipment, maturing
May 1999, refinanced in 1995 0
6.18% installment note payable to GMAC
in monthly installments of $380
including principal and interest, secured
by transportation equipment, maturing
August 1996, paid off in 1995 0
</TABLE>
58
<PAGE> 59
JENNING ENVIRONMENTAL SERVICES, INC.
Notes to Financial Statements
December 31, 1995
NOTE 4 -- LONG-TERM DEBT (Continued)
<TABLE>
<S> <C>
10.50% installment note payable in
monthly installments of $1,492 including
principal and interest, secured by
refuse containers, maturing January 1997 18,347
9.50% installment note payable to a
financing company in monthly installments
of $1,654 including principal and
interest, secured by refuse containers,
maturing December 1996 18,781
8.25% installment note payable to a
financing company in monthly installments
of $1,722 including principal and
interest, secured by transportation
equipment, maturing June 1997 27,573
8.75% installment note payable to a
financing company in monthly installments
of $2,955 including principal and
interest, secured by refuse containers,
maturing October 1997 59,940
8.75% installment note payable to a
financing company in monthly installments
of $8,480 including principal and
interest, secured by transportation
equipment, maturing November 1997 179,123
8.75% installment note payable to a
financing company in monthly installments
of $4,012 including principal and
interest, secured by transportation
equipment, maturing April 1999 138,468
11.00% installment note payable to a
financing company in monthly installments
of $3,192 including principal and
interest, secured by refuse containers,
maturing April 1998 78,525
-----------
Total long-term debt 1,551,787
Less current portion (536,419)
-----------
Long-term debt $ 1,015,368
===========
</TABLE>
59
<PAGE> 60
JENNINGS ENVIRONMENTAL SERVICES, INC.
Notes to Financial Statements
December 31, 1995
NOTE 4 -- LONG-TERM DEBT (Continued)
The first three installment notes to a bank listed above are aggregated under a
master note to the bank in the amount of $2,000,000. This note bears interest
at .5% below the bank's prime rate at the time of any advance under the note,
and matures five years after the date of such advance. This note is
collateralized by substantially all business assets and is guaranteed by the
principal stockholder of the Company.
The principal portion of long-term debt matures according to the following
schedule:
<TABLE>
<S> <C>
1996 $536,419
1997 520,137
1998 351,431
1999 83,236
2000 60,564
----------
$1,551,787
==========
</TABLE>
Total interest costs incurred and expensed on the above notes was $158,441 for
1995.
NOTE 5 -- STOCKHOLDER LOANS
Loans from stockholder are unsecured, bear interest at the blended annual rate
published by the Internal Revenue Service, and are payable on demand.
NOTE 6 -- RELATED PARTY TRANSACTIONS
Banking Relations
The Company's principal stockholder is a director of Huntington National Bank
(formerly security National Bank). The Company had $118,740 on deposit at this
bank as of December 31, 1995. The Company also has its line of credit and
installment debt obligations at this bank. The principal balance of these loans
as of December 31, 1995 was $1,181,030.
Stockholder Loans
As discussed in Note 5, the Company had stockholder loans payable of $175,000
as of December 31, 1995. In February 1996, $100,000 of the loan outstanding
was repaid. Accrued interest on the stockholder loan as of December 31, 1995
was $21,334.
60
<PAGE> 61
JENNINGS ENVIRONMENTAL SERVICES, INC.
Notes to Financial Statements
December 31, 1995
NOTE 6 -- RELATED PARTY TRANSACTIONS (Continued)
Legal Fees
The Company retains a law firm in which a stockholder of the company is a
partner. The amount of fees paid to this firm in 1995 was $24,585.
NOTE 7 -- LEASES
The Company has noncancellable operating leases for office and shop facilities
that expire through 1999. Future minimum lease payments under the operating-
leases at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $45,775
1997 46,423
1998 42,685
1999 25,000
--------
Total minimum lease payments $159,883
========
</TABLE>
Total rent payments under the operating leases was $42,300 for the year ended
December 31, 1995.
NOTE 8 -- PRIOR PERIOD ADJUSTMENT
Certain errors resulting in an understatement of previously reported accounts
receivable and income as of December 31, 1994, in the amount of $112,500, were
discovered by management of the Company subsequent to the issuance of the
Company's financial statements on April 11, 1995. Accordingly, an adjustment
has been made to net income for the year ended December 31, 1994, and retained
earnings as of January 1, 1995, to correct the error.
61
<PAGE> 62
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Grand Central Sanitation, Inc.
and Related Companies
Pen Argyl, Pennsylvania
We have audited the accompanying combined balance sheet of Grand
Central Sanitation, Inc. and Related Companies as of December 31, 1995, and the
related combined statements of income, stockholders' equity and cash flows for
the year 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
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Grand
Central Sanitation, Inc. and Related Companies as of December 31, 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplementary
information is presented only for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ BUCKNO LISICKY & COMPANY
Allentown, Pennsylvania
September 19, 1996
62
<PAGE> 63
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
COMBINED BALANCE SHEET
December 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 166,238
Short-term investments 280,651
Trading securities 2,829,550
Accounts receivable, trade 2,498,766
Bid deposits 11,419
Prepaid expenses 149,974
-----------
Total current assets 5,936,598
-----------
PROPERTY AND EQUIPMENT
Land and land improvements 18,767,429
Quarry rights 375,000
Buildings and building improvements 2,729,491
Office equipment 726,776
Autos and trucks 10,114,121
Equipment 22,081,893
Containers 3,862,190
-----------
58,656,900
Less accumulated depreciation
and amortization 39,163,607
-----------
Property and equipment, net 19,493,293
-----------
OTHER ASSETS
New routes, less accumulated amortization
$495,400 669,370
Loans receivable, related parties 30,183
Cash surrender value, officers' life
insurance 1,801,281
Deferred income taxes 1,167,850
-----------
Total other assets 3,668,684
-----------
Total assets $29,098,575
===========
</TABLE>
(Continued)
63
<PAGE> 64
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
COMBINED BALANCE SHEET
December 31, 1995
(Continued)
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Note payable, bank $ 250,000
Current maturities of long-term debt 3,228,763
Accounts payable, trade 1,825,953
Accrued profit sharing 100,000
Accrued interest payable 16,497
Payroll taxes payable 293,660
Landfill fees payable 355,330
Unearned revenue 597,575
-----------
Total current liabilities 6,667,778
-----------
LONG-TERM LIABILITIES
Notes payable, less current maturities 10,891,692
Landfill taxes payable 356,292
Other long-term liabilities 589,447
-----------
Total long-term liabilities 11,837,431
-----------
OTHER LIABILITIES
Landfill closure 2,048,247
Loans payable, stockholders 1,303,261
-----------
3,351,508
-----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $100 per share;
authorized 20,000 shares; issued and
outstanding 2,000 shares 200,000
Common stock, par value $1 per share;
authorized 10,000 shares; issued and
outstanding 8,400 shares 8,400
Additional paid-in capital 3,901,272
Retained earnings 3,132,186
-----------
Total stockholders' equity 7,241,858
-----------
Total liabilities and
stockholders' equity $29,098,575
===========
</TABLE>
See Notes to Combined Financial Statements.
64
<PAGE> 65
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
COMBINED STATEMENT OF INCOME
Year Ended December 31, 1995
<TABLE>
<S> <C>
Income:
Refuse $ 32,933,990
Real estate rentals 88,314
33,022,304
------------
Expenses:
Operating 25,988,080
Administrative 3,853,230
------------
29,841,310
------------
Operating
income 3,180,994
------------
Other income (expenses):
Portfolio income 300,111
Miscellaneous sales
and charges, net 24,912
Interest expense (1,319,061)
------------
(994,038)
------------
Income before
income taxes 2,186,956
Federal and state income
taxes 895,760
------------
Net income $ 1,291,196
============
</TABLE>
See Notes to Combined Financial Statements.
65
<PAGE> 66
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------- ------------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings
------ -------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1995 2,000 $200,000 8,400 $8,400 $3,901,272 $3,888,749
Net income - - - - - 1,291,196
Dividends paid - - - - - (28,067)
Distribution to
stockholders - - - - - (2,019,692)
----- -------- ----- ------ ---------- ----------
Balance,
December 31, 1995 2,000 $200,000 8,400 $8,400 $3,901,272 $3,132,186
===== ======== ===== ====== ========== ==========
</TABLE>
See Notes to Combined Financial Statements.
66
<PAGE> 67
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
STATEMENT OF CASH FLOWS
Year Ended December 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,291,196
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,561,243
Gain on sale of equipment and securities (106,682)
Provision for doubtful accounts 429,219
Noncash expenses offsetting loans payable,
stockholders 111,081
Increase in closure accrual 286,734
Corporate tax estimate 895,760
Changes in assets and liabilities:
(Increase) in trading securities (1,256,049)
Decrease in accounts receivable, trade 70,793
Decrease in bid deposits 925
(Increase) in prepaid expenses (5,110)
Decrease in prepaid federal and state taxes 3,526
(Increase) in loans receivable, related parties (788)
(Decrease) in accounts payable, trade (184,669)
Increase in other liabilities 490,401
----------
Net cash provided by operating activities 6,587,580
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment and securities, net
of reinvested purchases 191,760
Purchase of property and equipment (5,339,521)
Purchases of new routes (246,500)
----------
Net cash used in investing activities (5,394,261)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on note payable, bank (750,000)
Proceeds from long-term debt 4,719,790
Payments on long-term debt (2,921,749)
Payments on stockholder loans (467,232)
Distribution of earnings to stockholders (2,951,897)
----------
Net cash used in financing activities (2,371,088)
----------
</TABLE>
(Continued)
67
<PAGE> 68
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
STATEMENT OF CASH FLOWS
Year Ended December 31, 1995
<TABLE>
<S> <C>
Net decrease in cash (1,177,769)
Cash:
Beginning 1,344,007
----------
Ending $ 166,238
==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $1,319,061
==========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES
Long-term debt incurred to refinance other
long-term debt $5,035,441
==========
</TABLE>
See Notes to Combined Financial Statements.
68
<PAGE> 69
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies:
Combined statements:
The combined financial statements include the accounts of Grand
Central Sanitation, Inc., Grand Central Sanitary Landfill,
Inc., Grand Central Real Estate Company, Inc. and Pocono
Independent Paperstock Company, Inc. The stockholders are the
same for all of the companies.
Nature of operations:
The companies' operations consist of collection and disposal of
solid waste and recycling operations. The combined entities
have a single landfill in eastern Pennsylvania and accepts
trash predominantly from the Pennsylvania, New Jersey and New
York markets.
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 assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Trading securities:
Investment securities classified as trading securities are
those municipal bonds that the Company has over the history of
its operations turned over frequently. Decisions to trade
securities are based on various factors which include interest
rate fluctuation and maturity length. Trading securities are to
be carried at fair value. Unrealized gains or losses are to be
reported as increases or decreases in income from operations.
Fair values for trading securities are based on quoted market
prices. As of December 31, 1995, the difference between market
value and cost was immaterial for financial statement purposes
and, accordingly, the investment securities for trading are
carried at cost.
Short-term investments:
All certificates of deposit with a maturity of three months or
more are included in short-term investments. Short-term
investments are stated at cost which approximates their market
value as of December 31, 1995.
69
<PAGE> 70
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Property and equipment:
Property and equipment are stated at cost. Depreciation on
property and equipment is computed by various rates using
straight-line and accelerated methods. The lives of the assets
range as follows:
<TABLE>
<S> <C>
Land improvements 2-17 years
Quarry rights 20 years
Buildings and building improvements 5-31.5 years
Office equipment 5-10 years
Autos and trucks 3-7 years
Equipment 4-15 years
Containers 3-10 years
</TABLE>
New routes:
New routes are carried at cost less accumulated amortization
and are being amortized over a period of five years using the
straight-line method.
Unearned revenue:
Unearned revenue consists of billings for services to be
rendered in future periods.
Note 2. Landfill Tax Escrow\Landfill Taxes Payable
In March, 1994, the Company agreed to settle a tax dispute with
Plainfield Township. The settlement required the Company to pay the
balance of the escrow account and requires ten equal annual
installments of $62,000 with payments commencing prior to December,
1994. The Company will be entitled to credits in the aggregate of
$10,000 per year for amounts equal to the market value of product or
services supplied to Plainfield Township. As of December 31, 1995,
$356,292 discounted at 8% is owed to Plainfield Township.
Note 3. Related Party Transactions
The stockholders of Grand Central Sanitation, Inc. and Related
Companies are also the stockholders of Continental Interloc, Inc.
and Resource Consulting, Inc.
70
<PAGE> 71
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Loans receivable with these related parties as of December 31, 1995
are as follows:
<TABLE>
<S> <C>
Continental Interloc, Inc. $26,557
Resource Consulting, Inc. 3,626
-------
$30,183
=======
</TABLE>
The Company has loans payable, stockholders in the amount of
$1,303,261 as of December 31, 1995, respectively. The loans due to
the stockholders are noninterest bearing and have no fixed repayment
terms.
Note 4. Note Payable, Bank
Grand Central Sanitation, Inc. has a $1,000,000 line of credit with
a bank with interest payable monthly at the bank's National
Commercial Rate. The note is collateralized by accounts receivable,
machinery and equipment and is collateralized and cross defaulted
with other Meridian Bank debt. Grand Central Sanitary Landfill, Inc.
and Grand Central Real Estate Company, Inc. are sureties. The
balance of the note is $250,000 as of December 31, 1995.
Note 5. Long-Term Debt
Long-term debt as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Summit Bank, real estate
loans:
$1,375 per month plus interest
at prime plus .75%, due
December, 2000. $ 96,250
$425 per month plus interest
at prime plus .75%, due
December, 2000. 30,175
$467 per month plus interest
at prime plus .75%, due
December, 2000. 33,133
$488 per month plus interest
at prime plus .5%, due
April, 1997. 7,313
$1,750 per month plus interest
at prime plus .75%, due
March, 2003. 152,013
</TABLE>
71
<PAGE> 72
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
$708 per month plus interest
at prime plus .5%, due
July, 1997. 13,459
$833 per month plus interest
at prime plus .5%, due
July, 1997. 15,834
$1,806 per month plus interest
at prime plus .5%, due
August, 2002. 144,445
$2,583 per month plus interest
at prime plus .5%, due
August, 2002. 206,667
$3,417 per month plus interest
at prime plus .75%, due
May, 2003. 304,084
$2,000 per month plus interest
at 8.33%, due May, 2001. 130,000
Individual:
Route purchase loan, $6,818
per month including interest
at 6.5%, due December, 1997. 147,053
Equipment loan, $2,478 per
month plus interest at 6.25%,
various equipment pledged
as collateral due November,
1999. 101,127
Meridian Bank:
Equipment loan, $48,273 per
month including interest
at 6.45%, various equipment
pledged as collateral, due
January, 1998. 1,447,711
Real estate loan, $951 per
month plus interest at
bank's commercial rate plus
.75%, land pledged as collateral,
due January, 2004. 92,222
Real estate loan $353 per
month plus interest at
bank's commercial rate plus
.75%, land pledged as collateral,
due July, 1999. 15,232
</TABLE>
72
<PAGE> 73
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Real estate loan, $1,250
per month plus interest at
bank's commercial rate plus
.75%, land pledged as collateral,
due September, 2004. 131,250
Equipment loan, $2,083 per
month plus interest at bank's
commercial rate plus.5%, various
equipment pledged as collateral,
due December, 1996. 25,000
Consolidating loan, $94,704 per
month plus interest at bank's
commercial rate plus .25%, land,
accounts receivable and equipment
pledged as collateral, due April, 2000. 4,924,583
Equipment loan, $17,817 per month
plus interest at bank's commercial
rate, various equipment pledged as
collateral, due June, 2000. 979,917
Equipment loan, $1,667 per month
plus interest at bank's commercial
rate plus .5%, various equipment
pledged as collateral, due
September, 2000. 96,667
Equipment loan, $846 per month
plus interest at bank's commercial
rate plus .75%, various equipment
pledged as collateral, due
September, 1999. 88,813
Consolidating loan, $18,611 per
month plus interest at bank's
commercial rate plus .75%, land,
accounts receivable, and equipment
pledged as collateral, due June, 2003. 1,675,000
</TABLE>
73
<PAGE> 74
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Equipment loan, $533 per month
plus interest at 6.65%, various
equipment pledged as collateral,
due December, 1998. 18,667
Real estate loan, $594 per
month plus interest at bank's
commercial rate plus .75%, land
pledged as collateral, due July, 2007. 82,628
Consolidating loan, $41,667 per month
plus interest at bank's commercial
rate plus .25%, various equipment and
accounts receivable pledged as collateral,
due April, 2000. Grand Central Sanitary
Landfill, Inc. and Grand Central Real
Estate Company, Inc. are sureties of
the loan. 2,166,667
Caterpillar Financial Services:
Equipment loan, $3,967 per
month including interest at 8%,
equipment pledged as collateral,
due September, 1999. 153,802
Equipment loan, $4,992 per month
including interest at 8%, equipment
pledged as collateral, due
November, 1999. 200,842
Equipment loan, $5,503 per month
including interest at 9%, equipment
pledged as collateral, due
December, 1999. 221,138
Equipment loan, $1,787 per month
including interest at 9.5%,
equipment pledged as collateral,
due December, 1999. 71,140
</TABLE>
74
<PAGE> 75
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Equipment loan, $14,293 per
month including interest at
9%, equipment pledged as
collateral, due January, 1996. 6,548
Equipment loan, $6,149 per
month plus interest at 8.6%,
various equipment pledged as
collateral, due July, 2000. 278,699
Neffs National Bank:
Equipment loan, $945 per
month, including interest
at 9.5%, equipment pledged
as collateral, due June, 1996. 6,414
Equipment loan, $3,149 per
month including interest at
8.75%, equipment pledged as
collateral, due June, 1996. 18,424
Nations Bank:
Equipment loan, $12,513 per
month plus interest at
bank's commercial rate plus
.5%, equipment pledged as
collateral, due March, 1996. 37,538
-----------
14,120,455
Less current maturities 3,228,763
-----------
$10,891,692
===========
</TABLE>
Maturities of long-term debt as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31
<S> <C>
1996 $ 3,228,763
1997 3,173,198
1998 2,987,362
1999 2,567,046
2000 1,720,245
Thereafter 443,841
-----------
$14,120,455
===========
</TABLE>
75
<PAGE> 76
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 6. Income Taxes
Grand Central Sanitation, Inc. and Pocono Independent Paperstock
Company, Inc. are operating as S Corporations under the IRS and
Pennsylvania tax codes. The other two related companies included in
these financial statements are C corporations.
The Company adopted SFAS 109 in 1993. SFAS 109 requires the recognition
of deferred tax assets and liabilities for the future tax consequences
attributable to difference between the financial statements carrying
amounts of existing assets and liabilities and their respective tax
bases. In addition, the accounting standard requires the recognition of
future tax benefits, such as net operating loss carryforwards, to the
extent that realization of such benefits is more likely than not.
The components of the net deferred tax assets as of December 31, 1995
are as follows:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss carry-forwards:
Federal $ 969,850
State 401,377
Valuation allowance (203,377)
-----------
Net deferred tax asset $ 1,167,850
===========
</TABLE>
A valuation allowance has been provided to reduce the deferred tax
asset to a level which, more likely than not, will be realized. The net
deferred tax asset reflects managements estimate of the amount which
will be realized from reversals of taxable temporary differences, which
can be predicted with reasonable certainty. There was no change in the
valuation allowance for the year ended December 31, 1995.
As discussed further in Note 12, the companies were sold to USA Waste
Services, Inc. Due to the sale of the combined companies, the use of
USA Waste Services, Inc.'s effective tax rate of 40% was used to
calculate the tax provision for 1995 as if the combined companies were
classified as C corporations and there was taxable income for the
combined companies. The provision reduced the amount recorded as
distributed to the stockholders during the year.
76
<PAGE> 77
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
The provision for federal and state income taxes for the year ended
December 31, 1995 is as follows:
Federal and state income taxes $895,760
========
As of December 31, 1995, Grand Central Sanitary Landfill, Inc. has
a net operating loss carryforward of approximately $2,852,500 for
federal income tax purposes which, if not used, expires in 2007. It
also has a net operating loss carryforward of $4,054,311 available
to reduce future state taxable income. If not used, it will expire
in 1998.
As of December 31, 1995, Grand Central Real Estate Company, Inc.
has federal net operating loss carryforwards of $142,052 and
$46,923, which, if not used will expire in 2010 and 2009,
respectively. It also has a net operating loss carryforward of
$188,975 available to reduce future state taxable income. If not
used, it will expire in 1998.
Note 7. Profit Sharing Plan
Grand Central Sanitation, Inc. adopted a profit sharing plan for all
eligible employees effective April 1, 1985. The contribution to the
plan is $100,000 for the year ended December 31, 1995. It is the
policy of the Company to fund profit sharing costs accrued.
Note 8. Rent Expense
The Company rents various equipment on an as-needed basis. Rent
expense for the year ended December 31, 1995 is $187,708.
Note 9. Financial Instruments and Credit Risk
Cash:
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of cash. The
Company maintains cash accounts in various commercial banks. The
amount on deposit as of December 31, 1995 exceeded the insurance
limits of the Federal Deposit Insurance Corporation by
approximately $324,000 in one of the commercial banks. The Company
has not experienced any losses as a result of these noninsured
balances.
77
<PAGE> 78
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note payable, bank and long-term debt:
The fair value of the companies' note payable, bank and long-term
debt, whose interest rates are substantially based on the prime
rate, is estimated using rates currently available to the
companies for other borrowings with similar terms and remaining
maturities. As of December 31, 1995, the fair value of long-term
debt approximates the carrying value.
Loans payable, stockholders:
The fair value of the loans payable to the companies' stockholders
has not been determined since the loans bear no interest and have
no fixed repayment terms.
Note 10. Letters of Credit
The companies have various letters of credit with Meridian Bank to
support contracts for trash removal from various municipalities. As
of December 31, 1995, the amounts total $1,570,965.
The companies have a letter of credit with Meridian Bank to support
its obligation for closure of its landfill. The Commonwealth of
Pennsylvania obligates all landfill operations to set aside funds
or have valid letters of credit to support the clean-up of all
landfills upon closure of such landfill. As of December 31, 1995,
the letter of credit is $6,637,006.
78
<PAGE> 79
GRAND CENTRAL SANITATION, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 12. Subsequent Event
On May 6, 1996, Grand Central Sanitation, Inc. and Related
Companies entered into an agreement to sell the companies to USA
Waste Services, Inc. The sale, which was settled on May 15, 1996,
was a stock-for-stock transaction which is being accounted for as
a pooling of interests.
79
<PAGE> 80
GARNET OF VIRGINIA, INC, AND GARNET OF MARYLAND, INC.
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 TOGETHER WITH AUDITORS'
REPORT
80
<PAGE> 81
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Garnet of Virginia, Inc., and
Garnet of Maryland, Inc.:
We have audited the accompanying combined balance sheet of Garnet of Virginia,
Inc., and Garnet of Maryland, Inc. (Virginia and Washington, D.C.,
corporations, respectively) (the Companies), as of December 31, 1995, and the
related combined statements of operations, stockholders' deficit and cash
flows for the year then ended. These financial statements are the
responsibility of the Companies' 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 the Companies as of December
31, 1995, and the results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
February 2, 1996
81
<PAGE> 82
GARNET OF VIRGINIA, INC., AND GARNET OF MARYLAND, INC.
COMBINED BALANCE SHEET--DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 12,742
Accounts receivable 57,923
Prepaid expenses 41,671
------------
Total current assets 112,336
Restricted cash 893,769
Property and equipment, net of accumulated
depreciation and amortization 19,822,279
Investment in affiliated company 1,007,652
Other assets, net 3,200,762
------------
Total assets $ 25,036,798
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,114,493
Notes payable to related party 5,155,000
Demand notes payable to related parties 889,810
Accounts payable-
Trade 3,260,937
Related party 1,894,182
Accrued liabilities and other 1,202,096
------------
Total current liabilities 21,516,518
LONG-TERM DEBT, net of current maturities 1,826,656
LANDFILL CLOSURE, POSTCLOSURE, CAPPING AND
REMEDIATION RESERVES 7,487,500
------------
Total liabilities 30,830,674
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock 200
Retained deficit (5,794,076)
------------
Total stockholders' deficit (5,793,876)
------------
Total liabilities and stockholders' deficit
$ 25,036,798
============
</TABLE>
The accompanying notes are an integral part of this
combined financial statement.
82
<PAGE> 83
GARNET OF VIRGINIA, INC., AND GARNET OF MARYLAND, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES $ 622,934
COST OF OPERATIONS 1,478,510
-----------
Gross loss (855,576)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 942,048
-----------
Operating loss (1,797,624)
EQUITY IN NET LOSS OF AFFILIATED COMPANY 1,014,782
INTEREST EXPENSE 539,001
-----------
Net loss $(3,351,407)
===========
</TABLE>
The accompanying notes are an integral part of this
combined financial statement.
83
<PAGE> 84
GARNET OF VIRGINIA, INC., AND GARNET OF MARYLAND, INC.
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Total
-------------- Retained Stockholders'
Shares Amount Deficit Deficit
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, at December 31, 1994 100 $100 $(2,442,669) $(2,442,569)
Net loss -- -- (3,351,407) (3,351,407)
Issuance of common stock 100 100 -- 100
--- ---- ----------- -----------
BALANCE, at December 31, 1995 200 $200 $(5,794,076) $(5,793,876)
=== ==== =========== ===========
</TABLE>
The accompanying notes are an integral part of this
combined financial statement.
84
<PAGE> 85
GARNET OF VIRGINIA, INC., AND GARNET OF MARYLAND, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,351,407)
Adjustments to reconcile net loss to net cash provided by operating activities-
Depreciation and amortization 115,394
Changes in assets and liabilities-
Accounts receivable 177,709
Prepaid expenses (15,178)
Accounts payable, accrued liabilities and other 3,782,830
-----------
Net cash provided by operating activities 709,348
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,614,518)
Investment of bond proceeds, net (893,769)
Investment in affiliated company (281,658)
Organizational costs (250,000)
Payments for land purchase options (204,475)
-----------
Net cash used in investing activities (7,244,420)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings, net of related costs 7,410,503
Repayments of borrowings (863,138)
-----------
Net cash provided by financing activities 6,547,365
-----------
NET INCREASE IN CASH 12,293
CASH AT BEGINNING OF PERIOD 449
-----------
CASH AT END OF PERIOD $ 12,742
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized $ 53,060
===========
Property acquired under capital lease $ 284,228
===========
</TABLE>
The accompanying notes are an integral part of this
combined financial statement.
85
<PAGE> 86
GARNET OF VIRGINIA, INC., AND GARNET OF MARYLAND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND BUSINESS:
Garnet of Virginia, Inc., and Garnet of Maryland, Inc. (Virginia and
Washington, D.C., corporations, respectively) (collectively, the Companies),
are private companies engaged in various businesses in Washington, D.C. and
surrounding areas. The business of each of the Companies is described below.
Garnet of Virginia, Inc. (GOV)-GOV obtained a permit from King George County,
Virginia, for the construction of a municipal solid waste landfill facility in
King George County. With the exception of operating a temporary municipal
solid waste transfer station in King George County for purposes of disposing
of county residents' waste (in accordance with the landfill agreement with
King George County), GOV's primary operations to date have been the permitting
and design of a municipal solid waste landfill treatment facility.
Garnet of Maryland, Inc. (GOM)--GOM, through a joint venture agreement with LG
Industries, Inc. (LG), operates a municipal solid waste transfer station in
Washington, D.C. The transfer station began operations in April 1995. In
addition, GOM has obtained a permit to construct and operate a municipal solid
waste transfer station in Anne Arundel County, Maryland.
The Companies incurred operating losses during 1995 and as of December 31,
1995, the Companies had a working capital deficit of approximately $20.5
million. On February 2, 1996, all of the outstanding common stock of the
Companies was purchased by Sanifill, Inc. (Sanifill). The purchase price of
the Companies was sufficient to allow the Companies to recover the recorded
value of their assets.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Principles of Combination
Since voting control of the Companies is vested with a common group of
stockholders, and because the Companies share certain administrative functions
and costs, the financial statements of the Companies are presented on a
combined basis as if they were a single entity. The combined financial
statements represent the totals of the Companies' financial statements after
eliminating significant intercompany balances and transactions. The Companies
use the equity method to account for their investment in an affiliated company
in which the Companies hold a 50 percent interest.
Because the Companies do not have a parent-subsidiary relationship, the
individual common stock ownership of the corporate entities as of December 31,
1995, is as follows:
<TABLE>
<CAPTION>
Shares Par Shares
Legal Entity Authorized Value Outstanding Balance
------------ ---------- ----- ----------- -------
<S> <C> <C> <C> <C>
GOV 5,000 $1 100 $100
GOM 5,000 $1 100 $100
</TABLE>
Revenue Recognition
The Companies' revenues are comprised primarily of disposal fees charged to
customers.
86
<PAGE> 87
Cost of Operations
Cost of operations include disposal fees, labor, fuel, equipment maintenance,
depreciation, amortization charges and other direct costs of operating the
transfer station facilities.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include corporate management
salaries, clerical and other administrative overhead.
Properly and Equipment
Property and equipment is recorded at cost. Expenditures for major additions
and improvements are capitalized. Minor replacements, maintenance and repairs
which do not improve or extend the life of such assets are charged to
operations as incurred. Disposals are removed at cost, less accumulated
depreciation and amortization, and any resulting gain or loss is reflected in
current operations. The Companies have computed depreciation for financial
reporting purposes on the straight-line method. The estimated lives used in
computing depreciation are as follows:
Years
-----
Vehicles and equipment 7 years
Furniture and fixtures 5 years
Landfill development costs and land held for development include the cost of
property, engineering, legal and other professional fees, and interest
capitalized during the development period (which began in 1992) related to the
King George County landfill. These costs will be amortized using the
units-of-production method over the estimated permitted airspace capacity upon
commencement of operations.
Federal Income Taxes
The Companies have elected to be treated as S Corporations for tax purposes in
accordance with the Internal Revenue Code. Accordingly, federal and state
income taxes have not been provided in the accompanying combined financial
statements since taxes are payable by the stockholders on their total income
or loss from all sources.
3. PROPERTY AND EQUIPMENT:
A summary of property and equipment as of December 31, 1995, is as follows:
<TABLE>
<S> <C>
Landfill development costs $16,528,487
Land held for development 2,455,860
Vehicles and equipment 1,040,513
Furniture and fixtures 23,976
-----------
20,048,836
Less-Accumulated depreciation
and amortization (226,557)
-----------
$19,822,279
-----------
</TABLE>
87
<PAGE> 88
Maintenance and repairs charged to operations during fiscal 1995 were
approximately $13,000.
4. INVESTMENTS IN AFFILIATED COMPANY:
The Companies use the equity method of accounting for their investment in an
unconsolidated affiliate. The summarized balance sheet and income statement
information presented in the table below reflects the amounts related to the
LG/Garnet of Maryland Joint Venture (JV):
<TABLE>
<CAPTION>
December 31,
1995
------------
<S> <C>
Assets-
Current $ 2,417,431
Noncurrent 1,007,652
-----------
$ 3,425,083
===========
Liabilities and owners' equity-
Current liabilities $ 2,417,431
Owners' equity 1,007,652
-----------
$ 3,425,083
===========
Companies' investments in JV $ 1,007,652
===========
<CAPTION>
For the Year
Ended
December 31,
1995
------------
<S> <C>
Income statement-
Revenues $ 3,624,420
Gross loss $ (629,748)
Net loss $(1,014,782)
Companies' equity in loss of joint venture $(1,014,782)
===========
</TABLE>
Under the terms of the joint venture agreement, net losses as defined are
allocated 100 percent to GOM. Additionally, GOM is responsible for funding any
deficits of the JV, and as such, current assets of the joint venture include a
$2.1 million receivable from GOM for such deficits. Since the joint venture
began operations in April 1995, the JV has incurred operating losses. In the
event future profits are earned by the JV, GOM will have future first claim to
recover cumulative losses prior to distribution of profits to LG.
88
<PAGE> 89
5. OTHER ASSETS:
Other assets at December 31, 1995, are comprised of the following:
<TABLE>
<S> <C>
Rent deposit with King George County $2,000,000
Land purchase options 417,975
Organization costs 254,496
Bond issuance costs 298,202
Other 250,000
---------
Total 3,220,673
Less-Accumulated amortization (19,911)
----------
$3,200,762
==========
</TABLE>
Organizational costs associated with formation of the JV are amortized over
nine years, the term of the JV agreement, and bond issuance costs are
amortized over the term of the bonds. Amortization expense for 1995 totaled
$19,911.
6. LONG-TERM DEBT:
Long-term debt consists of the following as of December 31, 1995:
<TABLE>
<S> <C>
Notes payable, maturing in varying amounts through April 1996,
with interest ranging from prime plus 1% to prime plus 3% $ 8,598,274
Capitalized lease obligations payable in monthly
installments of principal and
interest through January 2000, with interest ranging
from 7.9% to 14.8% 1,342,875
Series 1995A revenue bonds, bearing interest at 10%, interest
payable semiannually, with final maturity at February 2016 1,000,000
-----------
Total debt 10,941,149
Less- Current portion 9,114,493
-----------
Long-term debt, net of current portion $ 1,826,656
===========
</TABLE>
Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ended December 31-
<S> <C>
1996 9,114,493
1997 341,917
1998 292,097
1999 184,859
2000 7,783
Thereafter 1,000,000
-----------
Total $10,941,149
===========
</TABLE>
89
<PAGE> 90
During 1995, the Companies obtained from the Industrial Development Authority
of King George County, Virginia, a credit facility under which it may issue up
to $30 million of tax-exempt industrial revenue bonds and $15 million in
taxable industrial revenue bonds. Bonds issued under this facility are secured
by future revenues of the landfill treatment facility as well as all personal
and real property of the Companies. Additionally, all stockholders of the
Companies have entered into a stock-pledge agreement further securing any
borrowings under this facility. The bonds are covered by an indenture of trust
and security agreement which places restrictions on the issuance of additional
stock in the Companies and the sale of assets of the Companies. The bonds are
subject to redemption at the direction of the Companies in the event of damage
or destruction to the landfill treatment facility and at any time on or after
February 2004 at a premium of 102 percent, declining to 100 percent in
February 2006. The bonds are also subject to mandatory sinking fund redemption
from 2007 through maturity in 2016. Proceeds from bonds issued are required to
be held in trust for the purposes of funding construction of the project and
may be utilized through requisition by the Company. As of December 31, 1995,
approximately $894,000 of unspent bond proceeds was held in trust and are
included in restricted cash in the accompanying combined balance sheet, and
$1,000,000 of tax-exempt industrial revenue bonds were outstanding under the
credit facility.
The notes payable are collateralized by various property and equipment.
Total assets recorded under capital leases and the accumulated depreciation
and amortization thereon were approximately $899,000 and $190,000 as of
December 31, 1995.
Interest capitalized on funds used for landfill development was approximately
$495,000 in 1995.
7. RELATED-PARTY TRANSACTIONS:
In the ordinary course of business, the Companies engage in transactions with
one of their significant stockholders, Blake R. Van Leer II and with Garnet,
Inc., an affiliated company. As of December 31, 1995, notes payable to Blake
R. Van Leer II and Garnet, Inc., totaled $675,000 and $214,810, respectively.
Both of these notes are payable on demand and bear interest at prime plus 1
percent. Interest expense on these notes totaled approximately $20,000 during
1995.
As of December 31, 1995, the Companies have notes payable of $5,155,000 to a
partnership which is owned by four stockholders of the Companies. These notes
payable are secured by a stock-pledge agreement from other stockholders of
the Companies, bear interest at prime plus 1 percent and are due in February
1996. Interest expense on these notes totaled $386,768 for the year ended
December 31, 1995, and is included in accrued liabilities in the accompanying
combined balance sheet.
In addition to the notes payable above, the Companies have accounts payable to
the JV totaling approximately $1,894,000, representing operating deficits
required to be funded by GOM under the terms of the joint venture agreement.
See Note 4.
90
<PAGE> 91
8. LANDFILL CLOSURE, POSTCLOSURE CAPPING AND REMEDIATION
RESERVES:
As part of the agreement with King George County for obtaining a municipal
solid waste disposal permit, the Companies assumed the closure and postclosure
responsibilities for the existing King George County landfill. As part of this
agreement, the Companies agreed to exhume all waste from the existing landfill
and transfer it to the new facility over a period not to exceed five years.
Additionally, the Companies have assumed responsibility for the removal and
disposal of tires from another county site.
The Companies have material financial obligations relating to the final
closure and postclosure care of the existing facility. Landfills are typically
developed in a series of cells, each of which is constructed, filled and
capped in sequence over the operating life of the landfill. When the final
cell is filled and the operating life of the landfill is over, the final cell
must be capped, the entire site must be closed and postclosure care and
monitoring activities begin. The Companies have estimated, as of December 31,
1995, that total costs for final closure of the existing facility, including
waste and tire removal, and postclosure activities, including cap maintenance,
groundwater monitoring, methane gas monitoring and leachate treatment/
disposal for up to 10 years after closure and remediation costs, will
approximate $6.0 million. In addition, the Companies have estimated, as of
December 31, 1995, that capping costs expected to occur will approximate $1.5
million. The above amounts are net of costs to be shared by King George County
under the terms of the landfill development agreement.
The above estimates are based on engineering reviews and the applicable state
and federal regulations. Engineering reviews are performed annually. In
performing the review, the Companies analyze actual costs incurred versus
total estimated costs, update cost estimates to reflect current regulatory
requirements and consider requirements of proposed regulatory changes.
Amendments to current laws and regulations governing the Companies' operations
or more stringent implementation thereof, or unfavorable cost variances could
have a material adverse effect on the Companies' operations or require
substantial capital expenditures.
9. SIGNIFICANT CUSTOMER AND VENDOR:
A certain customer of the Companies accounted for approximately 76 percent of
1995 revenues. This customer also provides services to the Companies which
accounted for 35 percent of 1995 cost of operations. Additionally, another
customer accounted for approximately 15 percent of 1995 revenues.
The Companies receive services related to the development of the King George
County landfill from a few vendors and contractors. Management believes they
can purchase such services from other vendors and contractors similar to those
currently offered whereby the Companies' operations would not be adversely
affected.
10. COMMITMENTS AND CONTINGENCIES:
Commitments
As of December 31, 1995, the Companies have entered into various options to
purchase land on which the King George County landfill treatment facility will
be located as well as land adjacent to the landfill area. Substantially all of
these options were exercised subsequent to year end for a total purchase price
of approximately $5.7 million.
91
<PAGE> 92
Leases
The Companies have entered into an operating lease agreement with King George
County for the land on which the landfill treatment facility will be located.
Rent will begin on this facility once operations commence. In addition, the
Companies have entered into lease agreements for land and buildings where
transfer stations are currently located or are to be constructed. Minimum
future lease payments under these leases are as follows:
<TABLE>
<CAPTION>
Year ending December 31-
<S> <C>
1996 $ 433,100
1997 1,942,600
1998 1,952,500
1999 1,961,145
2000 1,970,222
Thereafter 54,757,204
-----------
$63,016,771
===========
</TABLE>
Litigation
The Companies have received notice from an Underwriter used in connection
with the offering of its Industrial Revenue Bonds that the underwriter is
entitled to certain fees and expenses ranging from $200,000 to $570,000. The
Companies believes such fees are not owed and intend to vigorously contest the
fees.
The Companies have received notice from a partnership that the partnership is
entitled to a finder's fee for assisting the Company in obtaining third-party
financing. The Companies believe that they have no liability in this matter
and intend to contest the matter vigorously.
The Companies received notice from a third-party alleging breach of contract
in connection with a contract to purchase certain property for $945,000. The
Plaintiffs filed suit in March 1995 seeking approximately $595,000 in
compensatory damages, plus $350,000 in punitive damages. The Companies believe
that they have no liability in this matter and intend to contest the matter
vigorously.
In addition to the above-described litigation, the Companies are involved in
various other administrative proceedings, as well as other claims, disputes
and assessments that could result in additional litigation or other
proceedings. Management believes that the outcome of all of the matters
discussed above will not have a material adverse effect on the Companies
combined financial position or results of operations.
11. SUBSEQUENT EVENTS:
In January 1996, the Companies obtained a working capital loan in the amount
of $10 million from Sanifill. Proceeds of this loan were used to exercise
substantially all outstanding land purchase options and for general working
capital purposes. All of the land purchased by the Companies was deeded to King
George County in accordance with the terms of the landfill development
agreement. The Companies will lease this land from the county for operations
of the landfill.
92
<PAGE> 93
REPORT OF INDEPENDENT AUDITORS
To The Stockholders
The Orange Group Entities
Orlando, Florida
We have audited the accompanying combined balance sheet of The Orange
Group as of December 31, 1995, and the related combined statements of
operations, retained earnings, and cash flows for the year then ended. These
combined financial statements are the responsibility of the Group's management.
Our responsibility is to express an opinion on these combined 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.
As discussed in Note 15 to the combined financial statements, the
Group sold substantially all of its tangible and real property on February 5,
1996.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of The Orange
Group as of December 31, 1995, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ OSBURN, HENNING AND COMPANY
July 13, 1996
Orlando, Florida
93
<PAGE> 94
THE ORANGE GROUP
COMBINED BALANCE SHEET
December 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 146,321
Accounts receivable 912,305
----------
Total current assets 1,058,626
LAND AND EQUIPMENT, net of accumulated depletion and depreciation 4,560,795
OTHER ASSETS 116,395
----------
Total assets $5,735,816
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Note payable to bank $ 50,000
Current maturities of long-term notes payable 958,914
Current maturities of long-term notes payable - stockholders 428,439
Accounts payable 552,006
----------
Total current liabilities 1,989,359
----------
LONG-TERM LIABILITIES
Notes payable, less current maturities 3,490,105
Notes payable - stockholders, less current maturities 710,377
Accrued closure and post-closure costs 632,974
----------
Total long-term liabilities 4,833,456
----------
Total liabilities 6,822,815
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 10,720
Additional paid-in capital 146,380
Retained earnings (deficit) (483,192)
----------
(326,092)
Less treasury stock (760,907)
----------
Total stockholders' equity (deficit) (1,086,999)
----------
Total liabilities and stockholders' equity (deficit) $5,735,816
==========
</TABLE>
See Notes to Combined Financial Statements.
94
<PAGE> 95
THE ORANGE GROUP
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<S> <C>
SALES $7,798,100
----------
COST OF SALES:
Labor 1,285,690
Gas and oil 856,681
Materials 777,637
Depreciation and depletion 678,172
Repairs and maintenance 653,683
Trucking and hauling 498,077
Insurance 415,354
Equipment rental 274,620
Closure and post-closure provision 154,046
Other direct costs 464,735
----------
6,058,695
----------
Gross profit 1,739,405
----------
OPERATING EXPENSES:
Salaries 304,408
Management fee expense 195,941
Taxes and license 174,778
Insurance 174,377
Legal and professional 78,683
Office expense 68,937
Telephone and utilities 65,833
Rents 65,331
Other operating expenses 31,964
----------
1,160,252
----------
Income from operations 579,153
----------
OTHER INCOME (EXPENSE):
Interest (600,748)
Loss on sale of assets (21,753)
Miscellaneous 34,058
----------
(588,443)
----------
Net loss $ (9,290)
==========
</TABLE>
See Notes to Combined Financial Statements.
95
<PAGE> 96
THE ORANGE GROUP
COMBINED STATEMENT OF RETAINED EARNINGS
Year Ended December 31, 1995
<TABLE>
<S> <C>
Retained earnings, beginning $ 345,309
Net loss (9,290)
Dividends (819,211)
----------
Retained earnings (deficit), ending $ (483,192)
==========
</TABLE>
See Notes to Combined Financial Statements.
96
<PAGE> 97
THE ORANGE GROUP
COMBINED STATEMENT OF CASH FLOWS
Year Ended December 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,290)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization 3,600
Depletion 32,247
Depreciation 645,925
Loss on sale of assets 21,753
Provision for post-closure costs 154,046
Increase in:
Accounts receivable (131,035)
Other assets (9,221)
Increase in:
Accounts payable 242,739
---------
Net cash provided by operating activities 950,764
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (311,621)
Proceeds from sale of assets 265,976
---------
Net cash used in investing activities (45,645)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term notes payable 474,073
Repayment of long-term notes payable (826,343)
Proceeds from notes payable - stockholders 348,000
Repayment of notes payable - stockholders (147,603)
Proceeds from note payable to bank 30,000
Repayment of related party advances (4,958)
Dividends (819,211)
---------
Net cash used in financing activities (946,042)
---------
NET DECREASE IN CASH (40,923)
CASH, BEGINNING 187,244
---------
CASH, ENDING $ 146,321
=========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 517,917
=========
Supplemental disclosure of non cash investing and
financing activities:
Purchase of equipment with proceeds of notes payable $ 157,167
=========
Reduction of notes payable through sale of asset $ 107,110
=========
</TABLE>
See Notes to Combined Financial Statements.
97
<PAGE> 98
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1. Principles of Combination
The combined financial statements of The Orange Group (the Group)
include the financial statements of Orange Waste, Recycling &
Materials, Inc. (OWR), Orange Soil Cement, Inc. (OSC), Orange
Trucking, Inc. (OTI), and Orange Transportation Corp. (OTC). OWR, OSC
and OTI are owned fifty percent each by Randy Burden and Douglas
Hooker. OTC is owned fifty percent by Messrs. Burden and Hooker, and
fifty percent by a third party. The financial statements of the
companies have been combined on the basis of common ownership and
management. All significant balances and transactions between the
companies have been eliminated in the accompanying combined financial
statements.
Note 2. Business Activity and Organization
OWR was incorporated in 1981. Its principal business activity is the
operation of a 70 acre Class III landfill and a 70 acre C & D landfill
in Orange County, Florida. OWR also owns adjacent acreage which, when
fully permitted, is expected to increase the size of the landfill by
50 acres. Its revenues are derived from the sale of soil excavated
from the landfill (export), and the collection of fees from customers
depositing qualifying waste into the landfill (import).
OSC was incorporated in 1989. Its principal business activity is the
mixing and sale of soil cement to road paving companies in the Central
Florida area.
OTI was incorporated in 1988. Its principal business activity is the
hauling of soil for customers in the Central Florida area.
OTC was incorporated in November, 1994. Its principal business
activity is the hauling of waste materials from a collection site in
South Florida and an OWR Orlando transfer station to OWR's landfill.
Messrs. Burden and Hooker own another company, DTR, with which the
Group has occasional financing transactions. Because of the common
ownership of the Group and DTR, a note payable to DTR has been
classified in the financial statements as note payable - stockholders.
98
<PAGE> 99
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 3. Summary of Significant Accounting Policies
Sales
The companies comprising the Group use the accrual method of
accounting. Sales are recognized upon product or service delivery.
Cost of sales are recorded when sales are recognized.
Accounts Receivable
Accounts receivable are recorded net of the allowance for doubtful
accounts that management deems necessary to allow for potentially
uncollectible accounts. Based on its review of the detail of
accounts comprising accounts receivable at December 31, 1995,
management concluded no allowance was needed.
Land and Equipment
Land is recorded at cost, less accumulated depletion as related to
the landfill. Depletion is recorded based on an estimate of soil
removed as a percentage of the total soil available for removal.
Equipment is recorded at cost, less accumulated depreciation.
Depreciation is recorded based on the estimated useful lives of the
assets using the straight-line method.
Closure and Post-Closure Costs
The Group member (OWR) which owns and operates the landfills accrues
remaining estimated closure and post-closure costs on a
unit-of-production method based on the landfills' estimated
remaining airspace. The estimated accrual is treated as a long-term
liability in the accompanying combined financial statements. See
Note 7 for further discussion of these costs and accruals.
99
<PAGE> 100
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 3. Summary of Significant Accounting Policies - (Continued)
Income Taxes
The members of the Group, with the consent of their stockholders,
have elected to have their income or loss taxed under Section 1372
of the Internal Revenue Code, which provides that, in lieu of
corporate income taxes, the stockholders are taxed on or receive
deduction for their proportionate share of the income or loss.
Accordingly, no income tax provision or benefit has been made in the
accompanying combined financial statements.
Note 4. Land and Equipment
Land and equipment at December 31, 1995 are comprised of the
following:
<TABLE>
<CAPTION>
OWR OSC OTI OTC Combined
---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Land $ 759,513 $124,747 $ - $ - $ 884,260
Equipment 1,205,612 333,509 915,518 2,581,685 5,036,324
---------- -------- -------- ---------- ----------
1,965,125 458,256 915,518 2,581,685 5,920,584
Accumulated
depreciation (290,584) (205,172) (297,105) (346,000) (1,138,861)
Accumulated
depletion (220,928) - - - (220,928)
---------- -------- -------- ---------- ----------
Land and
equipment,
net $1,453,613 $253,084 $618,413 $2,235,685 $4,560,795
========== ======== ======== ========== ==========
</TABLE>
Depreciation and depletion in 1995 were $645,925 and $32,247,
respectively.
Note 5. Note Payable to Bank
OSC has a $50,000 line of credit with a bank. The line bears interest
at the rate of prime plus 1.5% and matures May 1, 1996. The loan is
secured by the accounts receivable of OSC which totalled approximately
$198,000 at December 31, 1995.
100
<PAGE> 101
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 6. Long-Term Notes Payable
Long-term notes payable at December 31, 1995 consist of the following:
<TABLE>
<S> <C>
AmSouth Bank; due $12,450 monthly, including interest
at 8% until September, 1996; thereafter, at prime
plus 1.5%; matures April 13, 1998; collateralized
by landfill $1,217,613
Equipment notes in original amount of $1,404,903;
payable $29,273 per month principal and interest
(9.365%); maturing January, 2000; collateralized
by rolling stock with a carrying value at 12/31/95
of $1,205,880 1,196,929
Equipment note of $1,156,213; payable $19,120 per
month principal and interest (8.273%); payments
beginning January, 1995; maturing January, 2000;
collateralized by trailers with a carrying value
at 12/31/95 of $1,011,685 994,076
Equipment notes payable at approximately $28,500
per month; at rates ranging from 7.33% to 14.94%;
maturing from March, 1996 to March, 1998;
collateralized by equipment with a carrying value
at 12/31/95 of $699,233 631,662
Two equipment notes in original amount of $481,969;
payable $10,541 per month principal and interest
(8.65% and 11.1%); maturing April, 1998 and March,
1999; collateralized by rolling stock with a
carrying value at 12/31/95 of $359,810 348,387
Two mortgages payable at various intervals
equalling approximately $33,000 per year; at rates
of 8% and 8.5%; maturing April, 1996 and
December, 1998; collateralized by land 60,351
Stockholder notes; unsecured; interest rates
ranging from 11.75% to 12.65%; aggregate monthly
payment totalling $12,674; any unpaid balances
due November, 2003 765,817
Stockholder advances at 10% due on demand 373,000
----------
5,587,835
Less current maturities (1,387,353)
----------
$4,200,482
==========
</TABLE>
CONTINUED ON NEXT PAGE
101
<PAGE> 102
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 6. Long-Term Notes Payable - (Continued)
Maturities of long-term notes payable as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Unrelated
Parties Stockholders Total
---------- ------------ ----------
<S> <C> <C> <C>
1996 $ 958,914 $ 428,439 $1,387,353
1997 876,198 69,965 946,163
1998 1,808,323 78,908 1,887,231
1999 576,138 88,996 665,134
2000 229,446 100,374 329,820
Thereafter - 372,134 372,134
---------- ---------- ----------
$4,449,019 $1,138,816 $5,587,835
========== ========== ==========
</TABLE>
Composition of long-term notes payable by company is as follows:
<TABLE>
<CAPTION>
Unrelated
Parties Stockholders Total
---------- ------------ ----------
<S> <C> <C> <C>
OWR $1,885,768 $ 237,635 $2,123,403
OSC 6,198 237,015 243,213
OTI 348,386 291,166 639,552
OTC 2,208,667 373,000 2,581,667
---------- ---------- ----------
$4,449,019 $1,138,816 $5,587,835
========== ========== ==========
</TABLE>
All of the above debt, as well as a $54,000 early pay-off penalty,
was paid in February, 1996 upon the sale of the business discussed
in Note 15. The early pay-off penalty has been expensed in these
financial statements, and is included in accounts payable in the
accompanying balance sheet.
Note 7. Closure and Post-Closure Costs
The Group (OWR) has material future financial obligations relating to
the closure of the filled areas of its landfills during their
productive lives, and the final closure and post-closure care at the
end of their productive lives. Landfills are typically developed in a
series of cells, each of which is constructed, filled and capped in
sequence over the productive life of the landfill. When the final cell
is filled, it must be capped, the entire site closed, and the
post-closure care and monitoring activities begin. As of December 31,
1995, the Group estimated the capping costs expected to occur and be
expensed over the landfills' useful lives to be $2,423,000. At
December 31, 1995, the Group expects total costs for final closure and
post-closure activities, including cap maintenance, groundwater
monitoring and other maintenance activities for up to thirty years
after closure, will approximate $1,827,000.
The $632,974 closure and post-closure accrual at December 31, 1995 is
based on the above estimated total costs factored by the estimated
remaining airspace at December 31, 1995.
CONTINUED ON NEXT PAGE
102
<PAGE> 103
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 7. Closure and Post-Closure Costs - (Continued)
Pursuant to applicable State of Florida regulations, a portion of the
post-closure costs as estimated under a regulatory method must either
be funded and escrowed currently, or a letter of credit or surety bond
placed with the State to assure the long-term care required. OWR has
met this obligation primarily by the funding of a separate, restricted
escrow cash account. Restricted cash escrowed for this purpose was
$61,358 at December 31, 1995, and is included in other assets on the
accompanying combined balance sheet. In addition, OWR has posted a
$25,000 letter of credit related to the estimated post-closure
activities.
Note 8. Components of Sales and Cost of Sales
Components of 1995 sales and cost of sales by company, after
elimination of intercompany transactions, are as follows:
<TABLE>
<CAPTION>
OWR OSC OTI OTC Combined
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales:
Landfill import
and export $ 2,584,793 $ - $ - $ - $2,584,793
Soil cement - 1,622,527 - - 1,622,527
Trucking - - 1,110,471 2,480,309 3,590,780
----------- ---------- ---------- ---------- ----------
2,584,793 1,622,527 1,110,471 2,480,309 7,798,100
----------- ---------- ---------- ---------- ----------
Cost of sales:
Labor 300,869 50,665 244,274 689,882 1,285,690
Gas and oil 79,674 7,184 125,168 644,655 856,681
Materials - 777,637 - - 777,637
Depreciation and
depletion 200,846 36,572 118,169 322,585 678,172
Repairs and
maintenance 207,074 145,049 74,670 226,890 653,683
Trucking and hauling 1,524 76,405 371,636 48,512 498,077
Insurance 33,243 8,717 89,675 283,719 415,354
Equipment rental 126,272 6,100 - 142,248 274,620
Closure and post-
closure accrual 154,046 - - - 154,046
Other direct costs 215,747 26,782 75,728 146,478 464,735
----------- ---------- ---------- ---------- ----------
1,319,295 1,135,111 1,099,320 2,504,969 6,058,695
----------- ---------- ---------- ---------- ----------
Gross profit (loss) $ 1,265,498 $ 487,416 $ 11,151 $ (24,660) $1,739,405
=========== ========== ========== ========== ==========
</TABLE>
103
<PAGE> 104
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 9. Stockholders' Equity (Deficit)
Components of stockholders' equity (deficit) by Company at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
OWR OSC OTI OTC Combined
----------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Common stock
($1 par) $ 7,500 (a) $ 120(b) $ 3,000 (c) $ 100 (d) $ 10,720
Additional
paid-in
capital 108,500 37,880 - - 146,380
Retained
earnings
(deficit) (387,204) 122,986 134,000 (352,974) (483,192)
----------- -------- -------- --------- -----------
Subtotal (271,204) 160,986 137,000 (352,874) (326,092)
Less treasury
stock (730,907)(e) - (30,000)(f) - (760,907)
----------- -------- -------- --------- -----------
Total $(1,002,111) $160,986 $107,000 $(352,874) $(1,086,999)
=========== ======== ======== ========= ===========
</TABLE>
(a) 7,500 shares authorized and issued; 2,000 shares outstanding
(b) 3,000 shares authorized; 120 shares issued and outstanding
(c) 3,000 shares authorized and issued; 2,000 shares outstanding
(d) 1,000 shares authorized; 100 shares issued and outstanding
(e) 5,500 shares, at cost
(f) 1,000 shares, at cost
Note 10. Related Party Transactions
The members of the Group have ongoing dealings with other affiliated
companies which do not belong to the Group. Specifically, among
other things, certain of these affiliates provide management and
accounting services and rent equipment to and from the Group. The
amounts charged (or not charged) for the above services and rentals
are informally determined by management, and are influenced by the
existence of the related party affiliations.
CONTINUED ON NEXT PAGE
104
<PAGE> 105
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 10. Related Party Transactions - (Continued)
During 1995, rental income of $39,574 was received from Orange Waste
East, rent expense and repairs expense of $176,063 was paid to
Southeast Rental and Leasing, Inc. (SRL), and management fees of
$195,941 were paid to ROBCO, EOM, and CFCD, Inc. - all related
parties by common ownership. Accounts payable on December 31, 1995
includes a $50,367 payable to SRL.
As mentioned in Note 1, OTC is jointly owned with a third party.
This third party owns an otherwise unrelated corporation, Waste
Magic Recyclers, Inc. (WMR), with which the Group conducts ongoing
business transactions. Sales revenue of $3,349,133 from WMR was
recorded during 1995. Accounts receivable on December 31, 1995
includes a $295,539 receivable from WMR.
All sales of equipment and related gains and losses were to related
parties.
Note 11. Leases
The Group leases equipment, vehicles and trailers under seven
separate operating leases. The required future minimum lease
payments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Annual
Payment
---------
<S> <C>
1996 $ 390,878
1997 304,378
1998 270,694
1999 174,308
2000 14,526
</TABLE>
Note 12. Concentrations
Financial statement instruments which potentially subject the Group
to concentrations of credit risk consist principally of temporary
cash investments and trade receivables. The Group places its
temporary cash investments with high quality financial institutions.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers and generally short
payment terms. However, substantially all of the Group's credit
customers are Central Florida businesses and are thus susceptible to
changes in that economy.
A significant portion of the Group's sales during 1995 were to WMR.
The loss of this customer could have a significant impact on the
Group's operations.
105
<PAGE> 106
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 13. Significant Risks And Uncertainties
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. For the Group, such estimates
significantly affect the recovery period of long-lived assets and
the expense accrual for landfill closure and post-closure costs.
Since such estimates relate to unsettled transactions and events as
of the balance sheet date, actual results, upon settlement, will
differ from those estimated in preparing the financial statements.
The Group's landfill activities are conducted under governmental
permits with fixed durations. Upon expiration of the permit period,
the permits are typically renewed, although the renewal review
period may be protracted. It is possible that the terms and
conditions of a renewed permit could differ from those of the former
permit, thus potentially affecting the comparability of the results
of operations currently to those in the future. At December 31, 1995
and February 5, 1996, two of the Group's several landfill operation
permits were in the renewal review process. Management expects these
permits to be renewed in due course and is unaware of any pending
changes that might have a significant adverse affect on the landfill
operations.
Note 14. Fair Value of Financial Instruments
There were no material differences in the recorded accounts of
financial instruments and their related fair values at December 31,
1995. The estimated fair value of the note payable to bank,
long-term notes payable, and long-term notes payable to stockholders
was determined based on the pay off of such indebtedness at face
value in connection with the February 5, 1996 sale discussed in Note
15 to the financial statements.
106
<PAGE> 107
THE ORANGE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 15. Event Subsequent to December 31, 1995
On February 5, 1996 the Group sold substantially all of its tangible
and real property. A portion of the purchase price was in the form
of assumption and/or liquidation of debt and leases associated with
such assets, as well as pay-off of indebtedness to the Group's
stockholders. The balance of the purchase price was allocated
between cash and stock of the purchaser.
In addition to their operating assets, the members of the Group sold
other contractual rights and their business names, and the
stockholders agreed not to compete with the businesses after the
transaction is consummated. Accordingly, the business purpose of the
members of the Group under the current management and ownership has
ceased and none of the Group remains viable in the business activity
they conducted during 1995.
107
<PAGE> 108
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of the Combined Companies:
We have audited the accompanying combined balance sheet of the Combined
Companies, as defined in Note 1, as of December 31, 1995, and the related
combined statements of operations, stockholders' equity and partners' capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Combined Companies' managements. 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 the Combined Companies as of
December 31, 1995, and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
September 13, 1996
108
<PAGE> 109
COMBINED COMPANIES (CITY, ALPINE AND LGI)
COMBINED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 729,867
Accounts receivable, net of allowance for doubtful
accounts of $25,468 199,602
Prepaid expenses and other 16,303
Deferred income taxes 99,479
----------
Total current assets 1,045,251
Property and equipment, net 1,271,183
Deferred income taxes 29,959
Other assets, net 578,234
----------
Total assets $2,924,627
==========
LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt $ 319,973
Current maturities of notes payable to
related parties 16,879
Accounts payable 172,712
Accrued liabilities 63,944
Deferred revenue 180,445
Income taxes payable 119,300
----------
Total current liabilities 873,253
LONG-TERM DEBT, net of current maturities 1,195,694
NOTES PAYABLE TO RELATED PARTIES, net of
current maturities 86,353
DEFERRED REVENUES 232,456
----------
Total liabilities 2,387,756
----------
STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL:
Common stock 1,100
Retained earnings and partners' capital 535,771
----------
Total stockholders' equity and
partners' capital 536,871
----------
Total liabilities and stockholders'
equity and partners' capital $2,924,627
==========
The accompanying notes are an integral part of this
combined financial statement.
109
<PAGE> 110
COMBINED COMPANIES (CITY, ALPINE AND LGI)
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING REVENUES $5,223,327
COSTS AND EXPENSES:
Operating 2,928,279
General and administrative 1,362,885
Depreciation and amortization 462,252
----------
4,753,416
Income from operations 469,911
OTHER INCOME (EXPENSE):
Interest expense (135,265)
Other expense (45,601)
Interest and other income 25,269
----------
(155,597)
----------
Income before income taxes 314,314
PROVISION FOR INCOME TAXES 49,098
----------
Net income $ 265,216
==========
The accompanying notes are an integral part of this
combined financial statement.
110
<PAGE> 111
COMBINED COMPANIES (CITY, ALPINE AND LGI)
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Retained
Common Stock Earnings and
---------------------- Partners'
Shares Amount Capital Total
-------- -------- ------------- -------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 10,100 $1,100 $368,019 $369,119
Net income - - 265,216 265,216
Distributions - - (97,464) (97,464)
------ ------ -------- -------
BALANCE, December 31,1995 10,100 $1,100 $535,771 $536,871
====== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of this
combined financial statement.
111
<PAGE> 112
COMBINED COMPANIES (CITY, ALPINE AND LGI)
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $ 265,216
Net income
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 462,252
Provision for doubtful accounts 25,468
Deferred income taxes (78,611)
Loss on sale of assets 6,316
Changes in assets and liabilities-
Accounts receivable (16,521)
Prepaid expenses and other 20,159
Accounts payable and accrued liabilities 18,407
Deferred revenue 278,417
Income taxes payable 88,819
---------
Net cash provided by operating activities 1,069,922
=========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (477,910)
Purchase of service route (253,317)
---------
Net cash used in investing activities (731,227)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 616,700
Repayments of borrowings (392,370)
Distributions to partners (97,464)
---------
Net cash provided by financing activities 126,866
---------
NET INCREASE IN CASH 465,561
CASH AT BEGINNING OF PERIOD 264,306
---------
CASH AT END OF PERIOD $ 729,867
---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for taxes $ -
---------
Cash paid for interest $ 135,575
---------
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
112
<PAGE> 113
COMBINED COMPANIES (CITY, ALPINE AND LGI)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND BUSINESS
The accompanying combined balance sheet and related combined statements of
operations, stockholders' equity and partners' capital and cash flows include
the following companies (collectively, the Combined Companies).
City Disposal, Inc. (City), provides waste collection and recycling services
primarily in Denver, Colorado.
Alpine Disposal and Recycling, Inc. (Alpine), provides waste collection and
recycling services in Portland, Oregon.
L.G. Industries, Inc. (LGI), operates a construction and demolition waste
transfer station and holds a 50 percent interest in a joint venture with Garnet
of Maryland (a subsidiary of Sanifill, Inc.). This joint venture operates a
municipal solid waste transfer station. LGI and the joint venture operate in
the same facility in Washington, D.C., and serve customers primarily in the
Washington, D.C., and Annapolis, Maryland, markets.
In February, May and August 1996, Sanifill, Inc. (Sanifill), acquired City,
Alpine and LGI, respectively. The purchase price for each of these companies is
sufficient to allow each company to recover the recorded value of its assets.
Sanifill intends to integrate the Combined Companies into its existing
operations.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Fiscal Year
Although the accompanying combined financial statements are dated as of and
for the year ended December 31, 1995, one of the companies has a fiscal
year-end of October 31, 1995. The combined financial statements include 12
months of the Combined Companies' operations, the fiscal year-ends of which are
all within 93 days of the December 31, 1995, year-end.
Revenue Recognition
The Combined Companies' revenues are comprised primarily of collection fees
charged to customers and sales of recyclables. Revenues are recorded in the
combined financial statements as the services are performed.
Operating Costs
Operating costs include labor, fuel, equipment maintenance, disposal fees and
other direct costs of operating the collection and recycling operations.
113
<PAGE> 114
-2-
General and Administrative Expenses
General and administrative expenses include corporate management salaries,
clerical and other administrative overhead.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized. Minor replacements, maintenance and repairs
which do not improve or extend the life of such assets are charged to
operations as incurred. Disposals are removed at cost less accumulated
depreciation and amortization, and any resulting gain or loss is reflected in
current operations. The Combined Companies have computed depreciation for
financial reporting purposes on the straight-line method. The estimated lives
used in computing depreciation are as follows:
<TABLE>
<CAPTION>
YEARS
----------
<S> <C>
Machinery and equipment 3-10 years
Buildings and improvements 3-31 years
</TABLE>
Other Assets
Other assets consist primarily of contracts purchased by one of the Combined
Companies (Alpine) to provide trash collection services to residential and
commercial customers within the city of Portland, Oregon. The purchased
contracts are accounted for using the purchase method of accounting and are
amortized over the life of each contract, ranging from three to 15 years.
The financial results of the purchased contracts have been included in the
combined financial statements of the Combined Companies from the date each
contract was purchased. During the year ended December 31, 1995, Alpine
purchased one contract from the city of Portland, Oregon, for $253,317 which is
being amortized over the life of the contract, three years. The pro forma
effect of the purchased contract for the full year was not material to the
results of operations or financial position for the Combined Companies.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
principles requires the Combined Companies to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
affect the reported amounts of revenues and expenses during the reporting
period.
Income Taxes
Alpine is a partnership for federal income tax purposes. In accordance with
the partnership provisions of the Internal Revenue Code, the earnings of Alpine
are included in the personal tax returns of the partners; therefore, no federal
or state income tax expense is recorded in the accompanying combined financial
statements for the income of this entity.
City and LGI are C Corporations for federal income tax purposes. City and LGI
use the liability method in accounting for income taxes. Under this method,
deferred taxes are recorded based upon differences between the financial
reporting basis and tax basis of assets and liabilities and are measured using
the enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
114
<PAGE> 115
-3-
3. STOCKHOLDERS' EQUITY:
Common stock of the corporate entities as of December 31, 1995, consists of the
following:
<TABLE>
<CAPTION>
Shares
Shares Issued and
Combined Company Par Value Authorized Outstanding
---------------- --------- ---------- -----------
<S> <C> <C> <C>
City Disposal, Inc. No par 50,000 10,000
L.G. Industries, Inc. No par 10,000 100
</TABLE>
4. PROPERTY AND EQUIPMENT:
A summary of property and equipment as of December 31, 1995, is as follows:
<TABLE>
<S> <C>
Machinery and equipment $1,972,347
Buildings and improvements 157,134
----------
2,129,481
Less-Accumulated depreciation
and amortization 858,298
----------
Total Property and equipment, net $1,271,183
==========
</TABLE>
Maintenance and repairs charged to operations during 1995 were approximately
$227,287.
5. OTHER ASSETS:
A summary of other assets, net of accumulated amortization, as of December 31,
1995, is as follows:
<TABLE>
<S> <C>
Route Costs $ 569,160
Other assets 9,074
----------
Total other assets $ 578,234
==========
</TABLE>
6. ACCRUED LIABILITIES:
Accrued liabilities and other consist of the following at December 31, 1995:
<TABLE>
<S> <C>
Accrued wages $ 13,134
Other accruals 50,810
----------
Total accrued liabilities and other $ 63,944
==========
</TABLE>
7. LONG-TERM OBLIGATIONS:
Long-Term Debt
Long-term debt consists of the following as of December 31, 1995:
<TABLE>
<S> <C>
Notes payable, maturing in varying amounts from December 1996
through July 2004, with interest ranging from 7.8% to 10.5% $1,089,572
Notes payable, due in March 2001, with interest at prime
plus 2.75% 371,095
Line of credit with a bank, due in January 1996, with interest
at prime plus 3% 55,000
----------
1,515,667
Less-Current maturities 319,973
----------
Long-term debt, net of current maturities $1,195,694
==========
</TABLE>
115
<PAGE> 116
-4-
Notes Payable to Related Parties
Notes payable to related parties consists of the following as of
December 31, 1995:
Notes payable, maturing in varying amounts from December 1997
through November 2004, with interest ranging from 8% to 10% $103,232
Less-Current maturities 16,879
--------
Long-term debt to related parties, net of current maturities $ 86,353
========
Interest expense for 1995 on related-party debt totaled $6,962.
Aggregate maturities of long-term debt and notes payable to related parties are
as follows:
Year ending December 31
1996 $ 336,852
1997 264,923
1998 238,039
1999 233,155
2000 235,924
Thereafter 310,006
----------
Total $1,618,899
==========
The notes payable are collateralized by various property and equipment of the
Combined Companies.
8. RELATED-PARTY TRANSACTIONS:
In February 1995, LGI entered into a joint venture agreement with Garnet of
Maryland (GOM) for the operation of a municipal solid waste transfer station in
Washington, D.C. Under the terms of this agreement, the joint venture (LGI/GOM)
is operated in a Washington, D.C. facility leased by LGI. LGI leases this
facility to LGI/GOM under a sublease agreement. Furthermore, under the terms of
the joint venture agreement, LGI receives reimbursement of various operating
expenses and receives a guaranteed royalty of at least $25,000 per month. In
the event that LGI/GOM's net income exceeds $25,000 per month, LGI and GOM
participate in profits on a 50/50 basis, with any amounts paid to LGI under the
$25,000 guarantee, reducing the amount of profit allocable to LGI. As a
condition to entering into the joint venture agreement, LGI received a payment
of $250,000 from GOM as an access fee. This amount is recorded in deferred
revenue and is being amortized over the life of the agreement (10 years). The
table below details LGI's related-party transactions for 1995:
Guaranteed royalties $250,000
Reimbursement of operating expenses 14,400
Reimbursement of rent expense 192,984
Accounts receivable from LGI/GOM 160,800
9. FEDERAL INCOME TAXES:
Deferred tax assets and liabilities are recognized and presented considering
the future consequences of temporary differences between the financial
statement basis and the tax basis of assets and liabilities using the tax rates
in effect during the period when taxes are actually paid or recovered.
116
<PAGE> 117
-5-
Federal income taxes have been provided based on the statutory rate of 34
percent plus applicable state taxes. Components of the income tax provision
reflected in the accompanying combined statement of operations for the year
ended December 31, 1995, consist of the following:
<TABLE>
<S> <C>
Current -
Federal $ 31,348
State 96,361
--------
Total 127,709
--------
Deferred -
Federal (63,492)
State (15,119)
--------
Total (78,611)
--------
Total income tax provision $ 49,098
========
</TABLE>
A reconciliation of the total income tax provision to the amounts calculated by
applying the federal statutory tax rate is as follows:
<TABLE>
<S> <C>
Tax at statutory rate $106,867
State taxes 7,463
Utilization of prior-year net operating losses (31,654)
Effect of excluding income of partnership (33,578)
--------
Total income tax provision $ 49,098
========
</TABLE>
The components of deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
Current Long-Term
--------- ---------
<S> <C> <C>
Deferred income tax assets -
Deferred revenue $59,429 $95,019
Cash to accrual conversions 20,625 --
State tax credits 19,425 --
------- -------
Total deferred income tax assets 99,479 95,019
------- -------
Deferred income tax liabilities -
Property and equipment -- 65,060
------- -------
Total deferred income tax liabilities -- 65,060
------- -------
Net deferred income tax asset $99,479 $29,959
======= =======
</TABLE>
The components of deferred income tax benefit for 1995 are as follows:
<TABLE>
<S> <C>
Deferred revenues $(56,982)
Depreciation 22,231
Cash to accrual conversions (43,860)
--------
Deferred income tax benefit $(78,611)
========
</TABLE>
117
<PAGE> 118
-6-
10. COMMITMENTS AND CONTINGENCIES:
Leases
The Combined Companies have various operating leases for facilities and
equipment. Rental expense under operating and month-to-month leases, net of
subleases, was $118,142 for the year ended December 31, 1995.
LGI entered into an operating lease for the Washington, D.C., coliseum for the
purpose of operating a construction and demolition transfer station. As
discussed in Note 8, LGI entered into a sublease agreement for this property
whereby rent expense is 100 percent reimbursed by LGI/GOM. Future minimum lease
payments, net of subleases, are as follows:
1996 $ 153,500
1997 163,000
1998 172,900
1999 181,545
2000 190,622
Thereafter 757,204
----------
Total $1,618,771
==========
Other than the lease described above, the Combined Companies have no
significant long-term noncancelable operating lease obligations.
Litigation
The Combined Companies are involved in certain claims and litigation arising in
the normal course of business. Management believes the outcome of such matters
will not have an adverse effect on the Combined Companies' combined financial
position or results of operations.
11. SUBSEQUENT EVENTS:
On August 30, 1996, Sanifill merged into USA Waste, Inc. (USA). Under the terms
of the merger, each share of Sanifill's outstanding common stock was exchanged
for 1.70 shares of USA common stock. In addition, USA assumed all of Sanifill's
options and warrants outstanding.
118
<PAGE> 119
SIGNATURES
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, thereunto duly authorized.
USA WASTE SERVICES, INC.
By /s/ GREGORY T. SANGALIS
-------------------------------------
Gregory T. Sangalis
Vice President, General Counsel
& Secretary
November 13, 1996
119
<PAGE> 120
USA WASTE SERVICES, INC.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
23.1 Consent of Independent Auditors
23.2 Consent of Independent Accountants
23.3 Consent of Independent Auditors
23.4 Consent of Independent Auditors
23.5 Consent of Independent Auditors
23.6 Consent of Independent Public Accountants
23.7 Consent of Independent Auditors
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the USA Waste Services, Inc.
Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259, 33-60103,
33-63981, 333-02181 and 333-08161), Registration Statements on Form S-3 (File
Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and 333-08573), and
Registration Statements on Form S-8 (File Nos. 33-43619, 33-72436, 33-84988,
33-84990, 33-59807, 33-61621, 33-61625, 33-61627, 333-14115, and 333-14613), of
our report dated October 25, 1996, on our audit of the balance sheet of Les
Entreprises de Rebuts Sanipan Inc. as of December 31, 1995, and the related
statements of earnings and retained earnings and changes in financial position
for the year then ended, our report dated October 25, 1996, on our audit of the
balance sheet of Transport Sanico Ltee as of December 31, 1995, and the related
statements of earnings and retained earnings and changes in financial position
for the year then ended, our report dated November 8, 1996, on our audit of the
historical summary of revenues and direct operating expenses of the Combined
Ontario and Michigan Operations of the Solid Waste Division of Philip
Environmental Inc. for the year ended December 31, 1995, and our report dated
November 8, 1996, on our audit of the historical summary of the net book value
of property, plant and equipment of the Combined Ontario and Michigan
Operations of the Solid Waste Division of Philip Environmental Inc. for the
year ended December 31, 1995, which are included in this Current Report on Form
8-K/A.
/s/ DELOITTE & TOUCHE
DELOITTE & TOUCHE
Chartered Accountants
Mississauga, Ontario
November 13, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the USA Waste Services,
Inc. Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259,
33-60103, 33-63981, 333-02181, and 333-08161), Registration Statements on Form
S-3 (File Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and
333-08573), and Registration Statements on Form S-8 (File Nos. 33-43619,
33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627,
333-14115, and 333-14613), of our report dated October 15, 1996, on our audit
of the balance sheet of Kasper Brothers, Inc. as of September 30, 1995 and the
related statements of operations and retained earnings and cash flows for the
fiscal year then ended, which is included in this Current Report on Form 8-K/A.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
November 13, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the USA Waste Services,
Inc. Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259,
33-60103, 33-63981, 333-02181, and 333-08161), Registration Statements on Form
S-3 (File Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and
333-08573), and Registration Statements on Form S-8 (File Nos. 33-43619,
33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627,
333-14115, and 333-14613), of our report dated March 11, 1996, on our audit
of the balance sheets of The Arnoni Group of Companies (consisting of The Arnoni
Group, Inc., M.C. Arnoni Company, South Hills Disposal Company, Cochran Mill
Associates, Inc. and Arnoni Family Partnership) as of December 31, 1995, and the
related combined statement of income and retained earnings and combined
statement of cash flows for the year then ended, which is included in this
Current Report on Form 8-K/A.
KAPLAN SIPOS & ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
Pittsburgh, Pennsylvania
November 13, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the USA Waste Services,
Inc. Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259,
33-60103, 33-63981, 333-02181, and 333-08161), Registration Statements on Form
S-3 (File Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and
333-08573), and Registration Statements on Form S-8 (File Nos. 33-43619,
33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627,
333-14115, and 333-14613), of our report dated March 18, 1996, on our audit
of the balance sheet of Jennings Environmental Services, Inc. (an S
corporation) as of December 31, 1995 and the related statements of income and
changes in stockholders' equity and the statement of cash flows for the year
then ended, which is included in this Current Report on Form 8-K/A.
BLAKE, KUEHLER, BABIONE & POOL
Orlando, Florida
November 13, 1996
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the USA Waste Services,
Inc. Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259,
33-60103, 33-63981, 333-02181, and 333-08161), Registration Statements on
Form S-3 (File Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and
333-08573), and Registration Statements on Form S-8 (File Nos. 33-43619,
33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627, 333-14115,
and 333-14613), of our report dated September 19, 1996, on our audits of the
combined balance sheet of Grand Central Sanitation, Inc. and Related Companies
as of December 31, 1995, and the related combined statements of income,
stockholders' equity and cash flows for the year then ended, which is included
in this Current Report on Form 8-K/A.
BUCKNO LISICKY & COMPANY
Allentown, Pennsylvania
November 13, 1996
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the USA Waste Services,
Inc. Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259,
33-60103, 33-63981, 333-02181, and 333-08161), Registration Statements on Form
S-3 (File Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and
333-08573), and Registration Statements on Form S-8 (File Nos. 33-43619,
33-59807, 33-61621, 33-61625, 33-61627, 33-72436, 33-84988, 33-84990, 333-14115,
and 333-14613), of our report dated February 2, 1996, on our audit of the
Combined balance sheet of Garnet of Virginia, Inc., and Garnet of Maryland,
Inc., as of December 31, 1995 and the related combined statements of operations,
stockholders' deficit and cash flows for the year then ended, and our report
dated September 13, 1996, on our audit of the combined balance sheet of the
Combined Companies (consisting of City Disposal, Inc., Alpine Disposal and
Recycling, Inc. and L.G. Industries, Inc.) as of December 31, 1995, and the
related combined statements of operations, stockholders' equity and partners'
capital and cash flows for the year then ended, which are included in this
Current Report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Houston, Texas
November 13, 1996
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the USA Waste Services,
Inc. Registration Statements on Form S-4 (File Nos. 33-77110, 33-59259,
33-60103, 33-63981, 333-02181, and 333-08161), Registration Statements on Form
S-3 (File Nos. 33-42988, 33-43809, 33-76226, 33-85018, 333-00097, and
333-08573), and Registration Statements on Form S-8 (File Nos. 33-43619,
33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627, 333-14115,
and 333-14613), of our report dated July 13, 1996, on our audit of the
combined balance sheet of The Orange Group (consisting of Orange Waste,
Recycling & Materials, Inc., Orange Soil Cement, Inc., Orange Trucking, Inc.
and Orange Transportation Corp.), as of December 31, 1995, and the related
combined statements of operations, retained earnings, and cash flows for the
year then ended, which is included in this Current Report on Form 8-K/A.
OSBURN, HENNING AND COMPANY
Orlando, Florida
November 13, 1996
