UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No.1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 11, 1999
WASTE SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4203626
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
0-25998
Commission File Number)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
(Address of principal executive offices) (zip code)
(781) 862-3000 Phone
(781) 862-2929 Fax
(Registrant's telephone number, including area code)
This document contains a total of 19 pages.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 11, 1999, Waste Systems International, Inc., through its wholly owned
subsidiary WSI Pennsylvania Holdings, Inc. ("WSI" or the "Company") acquired
Community Refuse Service, Inc, which is based in Shippensburg, Pennsylvania
pursuant to the terms of a Stock Purchase Agreement dated March 11, 1999 by and
among Robert H. Grove, Esther L. Grove, Michael Grove, Timothy Grove, Joseph
Grove and Robin Vink (collectively the "Shareholders" or "Sellers") and the
Company. The description of the acquisition transaction set forth herein is
qualified it its entirety by the Stock Purchase Agreement.
Pursuant to the Stock Purchase Agreement, WSI purchased all of the outstanding
shares of the Community Refuse Service, Inc. for approximately $28.0 million in
cash and assumption of debt. The acquisition has been accounted for using the
purchase method of accounting.
The transaction includes all of the assets and liabilities relating to the
operation of Community Refuse Service, Inc., which were used by the Shareholders
in the solid waste disposal business.
In a related transaction, WSI, through its wholly owned subsidiary WSI
Pennsylvania Holdings, Inc., also acquired substantially all of the assets of
Cumberland Waste Services, Inc. The acquired assets were used by the
Shareholders in the solid waste collection and recycling business.
Item 7. Financial Statements and Pro Forma Financial Information and Exhibits.
The following consolidated financial statements, pro forma financial information
and exhibits are filed as part of this report:
A. Consolidated Financial Statements for Community Refuse Service, Inc., and
Cumberland Waste Services, Inc. as of December 31, 1998 and 1997
(audited).
B. Pro forma Combined Condensed Statement of Operations for the year ended
December 31, 1998 and Combined Condensed Balance Sheet as of December 31,
1998 (unaudited).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
WASTE SYSTEMS INTERNATIONAL, INC.
Date: May 24, 1999 By: /s/ Philip Strauss
-------------- ---------------------
Philip Strauss
Chairman, Chief Executive Officer
and President
(Principal Executive Officer)
Date: May 24, 1999 By: /s/ Bob Rivkin
------------ --------------------
Bob Rivkin
Executive Vice President - Acquisitions,
Chief Financial Officer, Secretary,
Treasurer and Director
(Principal Financial and Accounting
Officer)
<PAGE>
Item 7. Financial Statements and Pro Forma Financial Information and Exhibits.
Item 7. (A) Consolidated Financial Statements for Community Refuse Service,
Inc., and Cumberland Waste Services, Inc. as of December 31, 1998
and 1997 (audited).
COMMUNITY REFUSE SERVICE, INC. AND AFFILIATE
Combined Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
Independent Auditors' Report 1
Combined Financial Statements:
Balance Sheets 2
Statements of Operations and Comprehensive Income 4
Statements of Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Combined Financial Statements 7
<PAGE>
Independent Auditors' Report
The Board of Directors
Community Refuse Service, Inc.:
We have audited the accompanying combined balance sheets of Community Refuse
Service, Inc. and Affiliate as of December 31, 1998 and 1997, and the related
combined statements of operations and comprehensive income, stockholders' equity
and cash flows for the years then ended. These combined financial statements are
the responsibility of the Company'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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Community Refuse
Service, Inc. and Affiliate as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Harrisburg, Pennsylvania
April 16, 1999
<PAGE>
COMMUNITY REFUSE SERVICE, INC. AND AFFILIATE
Combined Balance Sheets
December 31, 1998 and 1997
<TABLE>
<S> <C> <C>
Assets 1998 1997
------------- --------------
Current assets:
Cash and cash equivalents $ 1,214,014 $ 677,266
Investment securities 914,373 881,020
Accounts receivable (less allowance for doubtful
accounts of $50,000 for 1998 and 1997) 430,212 466,826
Deposit on land purchase 23,000 --
Parts inventory 25,941 11,651
Other prepaid expenses 28,626 47,527
------------- -------------
Total current assets 2,636,166 2,084,290
------------- -------------
Property, plant and equipment:
Plant and equipment 7,358,806 6,926,163
Buildings - rental 130,497 95,497
Transportation equipment 405,656 380,220
Office equipment 50,115 39,936
Land 1,235,567 1,016,299
Landfill development costs 1,983,430 830,426
------------- -------------
11,164,071 9,288,541
Less accumulated depreciation and amortization 4,848,640 4,792,569
------------- -------------
Property, plant and equipment - net 6,315,431 4,495,972
------------- -------------
Other assets:
Loan to officer 6,376 6,376
Restricted securities 1,319,543 1,176,840
Other assets 2,621 190
------------- -------------
Total other assets 1,328,540 1,183,406
------------- -------------
Total assets $ 10,280,137 $ 7,763,668
============= =============
</TABLE>
<PAGE>
COMMUNITY REFUSE SERVICE, INC. AND AFFILIATE
Combined Balance Sheets
December 31, 1998 and 1997
<TABLE>
<S> <C> <C>
Liabilities and Stockholders' Equity 1998 1997
------------- -------------
Current liabilities:
Accounts payable $ 787,619 $ 187,793
Deferred revenue 477,788 443,561
Accrued expenses 219,373 146,824
Current portion of long-term debt 488,390 257,618
Current portion of landfill closure costs 385,000 512,000
------------- ------------
Total current liabilities 2,358,170 1,547,796
------------- ------------
Long-term liabilities:
Loan from stockholder 5,312 5,312
Landfill closure costs, less current portion 1,998,323 1,920,287
Long-term debt, less current portion 1,118,422 858,532
------------- ------------
Total long-term liabilities 3,122,057 2,784,131
------------- ------------
Total liabilities 5,480,227 4,331,927
------------- ------------
Stockholders' equity:
Capital stock, $1.50 par value, 2,000 shares issued
and outstanding 3,000 3,000
Capital stock, $1.00 par value, 1,000 shares issued
and outstanding 1,000 1,000
Accumulated other comprehensive income - net
unrealized appreciation on investment securities 35,096 22,436
Retained earnings 4,760,814 3,405,305
------------- ------------
Total stockholders' equity 4,799,910 3,431,741
------------- ------------
Total liabilities and stockholders' equity $ 10,280,137 $ 7,763,668
============= ============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
COMMUNITY REFUSE SERVICE, INC. AND AFFILIATE
Combined Statements of Operations and Comprehensive Income
For the years ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C>
1998 1997
------------- ------------
Revenues $ 6,772,524 $ 4,470,599
Cost of revenues 2,649,017 1,610,355
------------- ------------
Gross profit 4,123,507 2,860,244
General and administrative expenses 3,034,368 2,505,168
------------- ------------
Net operating income 1,089,139 355,076
------------- ------------
Other income (expense):
Interest and dividends 162,865 127,671
Gain (loss) on sale of fixed assets 135,590 (7,832)
Gain on sale of investment securities 6,709 --
Insurance proceeds 58,971 --
Interest expense (125,165) (123,692)
Other, net 27,400 21,001
------------- ------------
Net other income 266,370 17,148
------------- ------------
Net income 1,355,509 372,224
Other comprehensive income:
Unrealized gain on investment securities 12,660 9,171
------------- ------------
Comprehensive income $ 1,368,169 $ 381,395
============= ============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
COMMUNITY REFUSE SERVICE, INC. AND AFFILIATE
Combined Statements of Stockholders' Equity
For the years ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
Capital Capital Accumulated
stock stock other Total
$1.50 $1.00 comprehensive Retained stockholders'
par value par value income earnings equity
---------- ---------- -------------- ------------ -------------
Balances, January 1, 1997 $ 3,000 $ 1,000 $ 13,265 $ 3,103,081 $ 3,120,346
Comprehensive income:
Net income -- -- -- 372,224 372,224
Net unrealized change in investment securities -- -- 9,171 -- 9,171
Distributions to stockholders -- -- -- (70,000) (70,000)
---------- ---------- -------------- ------------ -------------
Balances, December 31, 1997 3,000 1,000 22,436 3,405,305 3,431,741
Comprehensive income:
Net income -- -- -- 1,355,509 1,355,509
Net unrealized change in investment securities -- -- 12,660 -- 12,660
---------- ---------- -------------- ------------ -------------
Balances, December 31, 1998 $ 3,000 $ 1,000 $ 35,096 $ 4,760,814 $ 4,799,910
========== ========== ============== ============ =============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
COMMUNITY REFUSE SERVICE, INC. AND AFFILIATE
Combined Statements of Cash Flows
For the years ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C>
1998 1997
-------------- ------------
Cash flows from operating activities:
Net income $ 1,355,509 $ 372,224
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 724,566 624,121
Investment earnings (162,865) (127,671)
Gain on sale of investment securities (6,709) --
(Gain) loss on sale of fixed assets (135,590) 7,832
Insurance proceeds (58,971) --
Decrease in accounts receivable 36,614 78,486
Increase in parts inventory (14,290) (11,651)
Increase (decrease) in landfill development costs (1,153,004) 218,268
Decrease in other prepaid expenses 18,901 82,436
Increase in other assets (2,431) (416)
Increase (decrease) in accounts payable 599,826 (164,154)
Increase (decrease) in deferred revenue 34,227 (189,534)
Increase in accrued expenses 72,549 46,918
Decrease in landfill closure costs (48,964) (431,074)
-------------- ------------
Net cash provided by operating activities 1,259,368 505,785
-------------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,425,431) (168,777)
Proceeds from sale of fixed assets 170,000 --
Purchase of investment securities (43,638) (795,603)
Proceeds from disposals of investment securities 29,654 760,480
Deposit on land purchase (23,000) --
Increase in restricted securities (142,703) (138,528)
Investment earnings 162,865 127,671
Insurance proceeds 58,971 --
-------------- ------------
Net cash flows used in investing activities (1,213,282) (214,757)
-------------- ------------
Cash flows from financing activities:
Increase in loans from stockholders -- 3,036
Proceeds from long-term borrowings 928,114 44,082
Principal repayment of long-term borrowings (437,452) (371,312)
Net distributions to stockholders -- (70,000)
-------------- ------------
Net cash flows provided by (used in) financing activities 490,662 (394,194)
-------------- ------------
Net increase (decrease) in cash and cash equivalents 536,748 (103,166)
Cash and cash equivalents, beginning of year 677,266 780,432
-------------- ------------
Cash and cash equivalents, end of year $ 1,214,014 $ 677,266
============== ============
Supplemental disclosures:
Cash paid during the year for interest $ 125,165 $ 123,692
================= ============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
(1) Summary of Significant Accounting Policies
(a) Principles of Combination
The combined financial statements include the financial statements
of Community Refuse Service, Inc. (CRS) and its affiliate,
Cumberland Waste Services, Inc. (CWS). Both companies are 100%
owned by members of the same family. All significant intercompany
balances and transactions have been eliminated in combination. A
brief description of the operations of the companies follows:
CRS was incorporated on October 12, 1968. CRS currently operates a
landfill in Cumberland County, Pennsylvania.
CWS began operations as of January 1, 1996 when the separate and
distinct operations were extracted from CRS. CWS currently
operates a waste removal and transfer service in central
Pennsylvania.
(b) Revenue Recognition
Disposal revenue is recognized when refuse is delivered to the
landfill. Hauling revenue is recognized during the time period
service takes place. Deferred revenue on the combined balance
sheets represents disposal revenue collected in advance and
hauling revenue collected prior to the service period.
(c) Cash and Cash Equivalents
All short-term investments which have an original maturity of 90
days or less are considered to be cash equivalents.
(d) Investment Securities and Restricted Securities
Securities held by the Company at December 31, 1998 and 1997
consist of U.S. Treasury, municipal debt and equity securities.
Debt and equity securities are classified into one of three
categories: trading, available-for-sale, or held-to-maturity.
Trading securities are bought and held principally for the purpose
of selling them in the near term. Held-to-maturity securities are
those securities in which the Company has the ability and intent
to hold the security until maturity. All securities not included
in trading or held-to-maturity are classified as
available-for-sale. The Company has no securities classified as
trading.
Available-for-sale securities are recorded at fair value and are
classified as investment securities on the combined balance
sheets. Unrealized holding gains and losses on available-for-sale
securities are excluded from earnings and are reported as a
separate component of other comprehensive income until realized.
Realized gains and losses from the sale of available-for-sale
securities are determined on a specific identification basis.
Dividend and interest income is recognized when earned. Restricted
securities consist principally of securities deposited in
connection with the future financial obligation of landfill
closure. Amounts are principally invested in fixed income
securities of the U.S. government and municipalities. The Company
considers its restricted securities to be held-to-maturity.
Held-to-maturity securities are recorded at amortized cost.
(e) Landfill Development Costs
The costs incurred to prepare a new section (cell) of the landfill
are reflected as landfill development costs on the combined
balance sheets. The landfill development costs are amortized using
the unit-of-production method, which is calculated using the total
units of airspace filled during the year in relation to total
estimated permitted airspace capacity of the new cell.
(f) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation
expense is computed using straight-line and accelerated methods
over estimated useful lives between 5 and 15 years, except for
buildings, which are depreciated over 27.5 to 31.5 years.
Additions, improvements, and expenditures for maintenance that
significantly extend the useful lives of equipment are
capitalized. Other expenditures for maintenance and repairs are
expensed.
When property or equipment is sold or retired, the original cost
is removed from the asset account together with the related
accumulated depreciation. Gains or losses resulting from these
transactions are included in income or expense.
(g) Accrued Landfill Closure Costs
The Company estimates and accrues landfill closure costs on a unit
of production basis over the remaining permitted airspace capacity
for each Pennsylvania Department of Environmental Protection
expansion approval. The accrual is based on final capping of the
site, site inspection, leachate management, and methane gas
control.
(h) Income Taxes
Both companies, with the consent of their stockholders, have
elected to be treated as Small Business Corporations (S
corporations) for federal income tax purposes which provides that,
in lieu of corporation income taxes, the stockholders are taxed on
each company's taxable income. Therefore, no provision for federal
income taxes is presented in these combined financial statements
for these earnings. Both companies have also elected to be taxed
as S corporations for state income tax reporting and no provision
for state income taxes is presented.
(i) Long-Lived Assets
Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets.
(j) 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.
(k) Comprehensive Income
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for reporting and
presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income consists of net
income and net unrealized gains (losses) on securities and is
presented in the combined statements of stockholders' equity and
operations and comprehensive income. The Statement requires only
additional disclosures in the combined financial statements; it
does not affect the Company's financial position or results of
operations. Prior year financial statements have been reclassified
to conform to the requirements of SFAS No. 130.
(2) Investment Securities
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value for available-for-sale securities by major
security type and class of security at December 31, 1998 and 1997 were as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
unrealized unrealized
Amortized holding holding Fair
cost gains losses value
--------- ----------- ----------- ---------
At December 31, 1998
U.S. Treasury securities $ 785,120 6,749 $ - $ 791,869
Equity securities 94,157 28,347 - 122,504
--------- ----------- ---------- ---------
$ 879,277 $ 35,096 $ - $ 914,373
========= =========== ========== =========
At December 31, 1997
U.S. Treasury securities $ 785,120 $ - $ (858) $ 784 262
Equity securities 73,464 23,294 - 96,758
--------- ---------- ---------- ---------
$ 858,584 $ 23,294 $ (858) $ 881,020
========= ========== ========== =========
</TABLE>
(3) Deposit on Land Purchase
The Company has entered into a contract to purchase a property adjacent
to its landfill. A down payment of $23,000 on December 21, 1998 was made.
This represents approximately ten percent of the total purchase price.
(4) Restricted Securities
Under the regulations of the Commonwealth of Pennsylvania's Department of
Environmental Protection (DEP), the Company must post a bond to insure
funds for any clean-up activity that may be required upon the closure of
the landfill facility. The bond would be returned upon the closure of the
facility less any amount used for clean-up activities. The Company
estimates that the remaining life of the current facility is at least
five to ten years. The DEP commitment is secured by various letters of
credit issued by Valleybank and Trust Company in the amount of
$1,990,470. The DEP commitment for the area known as the Newton Expansion
is secured by a letter of credit issued by Valleybank and Trust Company
in the amount of $3,576,668.
Pursuant to a disposal agreement between the Solid Waste Authority of
Cumberland County and the Company a ten-percent performance bond is to be
provided. Under the agreement, the Company has reserved disposal capacity
for municipal solid waste at its landfill to serve the long-term disposal
needs of Cumberland County. Additionally, the agreement establishes
maximum disposal rates which the Company may charge the County.
Valleybank and Trust Company is holding U.S. Treasury and municipal debt
securities in trust to secure the two obligations discussed above, as
follows:
1998 1997
---------- ----------
Pennsylvania Department of
Environmental Protection $1,175,232 $1,041,002
Cumberland County Waste Authority 144,311 135,838
---------- ----------
$1,319,543 $1,176,840
========== ==========
(5) Deferred Revenue
Deferred revenue at December 31, 1998 and 1997 consists of the following:
1998 1997
---------- ----------
Landfill disposal deposit $ 433,573 $ 433,573
Hauling fees 44,215 9,988
---------- ----------
$ 477,788 $ 443,561
========== ==========
The Company reserved landfill space for future use by a single customer.
The customer advanced a non-refundable deposit of $750,000 on January 3,
1995. The deposit is being recognized as income on a pro-rated basis as
the landfill space is utilized. The customer is required to utilize the
reserved space within five years from the date of the deposit or the
remaining deposit will be forfeited. The agreement limits the amount of
usage on a monthly basis. As of December 31, 1998 and 1997, $433,573
remains as deferred revenue under this arrangement.
(6) Line of Credit
The Company has a $3,175,000 line of credit facility with Valleybank and
Trust Company, of which $2,175,000 is available for use as Letters of
Credit. There were letters of credit outstanding at December 31, 1998
amounting to $1,990,470. The remaining $1,000,000 is available for
operations. Interest is payable at the Valleybank and Trust Company base
rate. There was no outstanding balance as of December 31, 1998 or 1997.
(7) Long-Term Debt
As of December 31, 1998 the Company had long-term debt as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Monthly Current
Lender/security Rate Maturity payment Balance portion
--------------- ---- -------- -------- ---------- ---------
CRS
Caterpillar Financial Services:
CAT CS563 Compactor 6.13% 11/2000 $ 1,344 $ 29,088 $ 14,751
Tractor D8N 7.39% 5/2002 5,437 250,900 48,330
Valleybank and Trust Company:
JCB Backhoe 7.75% 3/2001 994 24,708 10,386
Waste Treatment Plant 10.25% 1/2002 19,182 659,910 186,917
CAT 826 Compactor 7.88% 4/2001 5,474 144,129 56,339
--------- ---------
1,108,735 316,723
--------- ---------
CWS
Valleybank and Trust Company:
1996 Mack truck 8.00% 4/2001 2,261 65,265 22,756
1996 Mack truck 8.00% 4/2001 2,794 80,659 28,123
1999 Leach Curb Tender 8.08% 6/2003 3,149 142,268 27,409
1999 Mack truck 7.95% 7/2003 2,025 34,168 22,391
Associates Commercial
Corporation:
1996 Marmon tractor 8.58% 2/2001 1,781 42,118 18,472
1998 Mack RD688S 7.95% 5/2001 2,536 65,605 25,371
Financial Federal Credit, Inc.-
Equity Lease:
Schaeffer 95 gal containers 5.00% 5/2001 2,494 67,994 27,145
--------- ---------
498,077 171,667
--------- ---------
Totals $1,606,812 $ 488,390
========= =========
</TABLE>
As of December 31, 1998 the long-term debt matures as follows:
Year
----
1999 $ 488,390
2000 516,074
2001 414,552
2002 169,334
2003 18,462
----------
Totals $ 1,606,812
==========
As of December 31, 1997 the Company had long-term debt as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Monthly Current
Lender/security Rate Maturity payment Balance portion
--------------- ---- -------- -------- ---------- ---------
CRS
Caterpillar Financial Services:
CAT CS563 Compactor 6.13% 11/2000 $ 1,344 $ 42,960 $ 13,876
950 CAT 8.34% 4/1998 3,671 14,450 14,450
Valleybank and Trust Company:
JCB Backhoe 7.75% 3/2001 994 34,276 9,727
Waste Treatment Plant 10.25% 1/2002 19,182 831,823 172,157
--------- ---------
923,509 210,210
--------- ---------
CWS
Valleybank and Trust Company:
1996 Mack truck 8.00% 4/2001 2,261 86,159 21,203
1996 Mack truck 8.00% 4/2001 2,794 106,482 26,205
--------- ---------
192,641 47,408
--------- ---------
Totals $1,116,150 $ 257,618
========= =========
</TABLE>
(8) Employee Benefit Plans
The Company currently has two employee benefit plans in existence. The
Company adopted its defined contribution profit sharing plan on January
1, 1989. The plan is a non-contributory money purchase plan. The
Company's plan has received Internal Revenue Service approval under
Internal Revenue Code sections 401(A) and 501(A). The Company may, at its
sole discretion, contribute up to 10% of the annual salaries of
participants to the plan. The plan covers virtually all of the Company's
employees. For the years ended December 31, 1998 and 1997 no
contributions were made.
Additionally, the Company created a 401(k) plan in 1995. Employees are
permitted to contribute up to 15% of their salary and the Company matches
100% of the contributions, up to $500 per year. Company contributions
amounted to $7,245 and $6,638 in 1998 and 1997, respectively.
(9) Change in Company Ownership
The stockholders of Community Refuse Service, Inc. sold their stock, and
Cumberland Waste Services, Inc. sold substantially all of its assets, to
Waste Systems International, Inc. on March 11, 1999.
<PAGE>
Item 7. (B) Pro forma Combined Condensed Statement of Operations for the year
ended December 31, 1998 and Combined Condensed Balance Sheet as of
December 31, 1998 (unaudited).
Pro Forma Combined Condensed Financial Statements as of December 31, 1998.
On March 11, 1999, Waste Systems International, Inc. ("WSI" or the "Company")
acquired Community Refuse Service, Inc. and its affiliate, Cumberland Waste
Services, Inc. (collectively, "Community Refuse and Affiliate") which are based
in Shippensburg, Pennsylvania, pursuant to the terms of the stock purchase and
asset agreements dated March 11, 1999. Pursuant to the terms of the stock
purchase and asset agreements, WSI purchased all of the outstanding shares of
Community Refuse and substantially all the assets of Cumberland Waste Services
for approximately $30.1 million in cash and assumption of liabilities.
The following unaudited Pro Forma Consolidated Condensed Financial Statements
are based on historical Consolidated Financial Statements of Waste Systems
International (WSI) and Community Refuse Service, Inc. and Affiliate to give
effect to the acquisition of Community Refuse Service, Inc. and Affiliate for
consideration of $30,140,043.
The transaction is presented as if it had occurred on January 1, 1998.
The pro forma financial data may not be indicative of what the financial
condition of WSI would have been had the transaction to which such data gives
effect been completed on the date assumed, nor are such data necessarily
indicative of the financial condition of WSI that may exist in the future.
The following unaudited Pro Forma information should be read in conjunction with
the notes thereto and the consolidated financial statements and notes of WSI for
each of the three years in the period ended December 31, 1998 included in the
Company's December 31, 1998 Form 10K and the historical financial statements of
Community Refuse Service, Inc. and Affiliate appearing elsewhere in this filing
Waste Systems International, Inc.
Proforma Financial Statements
December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Waste Community
Systems Refuse
International, and Proforma Adjustments Proforma
Inc. Affiliate Total Debit Credit Total
-------------- ------------ ------------- ------------ ------------- ------------
Cash $ 193,613 $ 1,214,014 $ 1,407,627 $ 69,892,059(A,B,C) $ 1,214,014(C) $ 70,085,672
Investments 39,842 914,373 954,215 - - 954,215
Accounts receivable 5,235,534 430,212 5,665,746 - 430,212(C) 5,235,534
Other current assets 4,769,285 77,567 4,846,852 - - 4,846,852
------------ ----------- ------------ ------------ ----------- -----------
Total current assets 10,238,274 2,636,166 12,874,440 69,892,059 1,644,226 81,122,273
Property, plant and equipment, net 44,685,735 6,315,431 51,001,166 24,565,238 (A) - 75,566,404
Other assets 41,192,690 1,328,540 42,521,230 774,895 (A) - 43,296,125
------------ ----------- ------------- ------------ ----------- ------------
Total assets $ 96,116,699 $ 10,280,137 $ 106,396,836 $ 95,232,192 $ 1,644,226 $199,984,802
============ ============ ============= ============ =========== ============
Current portion, long term debt 8,259,922 488,390 8,748,312 488,390 (C) - 8,259,922
Accounts payable 3,849,632 787,619 4,637,251 - - 4,637,251
Accrued expenses 2,742,539 219,373 2,961,912 - - 2,961,912
Deferred revenue 1,866,128 477,788 2,343,916 - - 2,343,916
Current portion of land fill
closure costs - 385,000 385,000 - - 385,000
------------ ----------- ------------- ------------- ----------- ------------
Total current liabilities 16,718,221 2,358,170 19,076,391 488,390 - 18,588,001
Long-term debt, less current portion 74,861,187 1,118,422 75,979,609 1,118,422 (C) 100,000,000(B) 174,861,187
Loan from stockholder - 5,312 5,312 5,312 (C) - -
Landfill closure costs 2,798,597 1,998,323 4,796,920 - - 4,796,920
------------ ----------- ------------- ------------ ----------- -------------
Total liabilities 94,378,005 5,480,227 99,858,232 1,612,124 100,000,000 198,246,108
Capital stock 117,184 4,000 121,184 4,000 (A) - 117,184
Additional paid in capital 37,810,712 - 37,810,712 - - 37,810,712
Accumulated comprehensive income - 35,096 35,096 35,096 (A) - -
Retained earnings (36,189,202) 4,760,814 (31,428,388) 4,760,814 (A) - (36,189,202)
------------- ----------- ------------- ------------ ----------- -------------
Total stockholders' equity 1,738,694 4,799,910 6,538,604 4,799,910 - 1,738,694
------------- ----------- ------------- ------------ ----------- -------------
Total liabilities and
stockholders' equity $ 96,116,699 $ 10,280,137 $ 106,396,836 $ 6,412,034 $100,000,000 $ 199,984,802
============= ============ ============= ============ ============ =============
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Waste Community
Systems Refuse
International, and Proforma Adjustments Proforma
Inc. Affiliate Total Debit Credit Total
-------------- ------------ ------------- ------------ ------------- ------------
Revenue $ 21,044,584 $ 6,772,524 $ 27,817,108 - - 27,817,108
Cost of revenue 14,499,528 1,924,451 16,423,979 - - 16,423,979
Depreciation and amortization 4,501,424 724,566 5,225,990 1,645,703(A) - 6,871,693
------------- ----------- -------------- ------------ ------------- ------------
Gross profit 2,043,632 4,123,507 6,167,139 1,645,703 - 4,521,436
Selling, general and adminstrative 4,482,478 3,034,368 7,516,846 - - 7,516,846
Other costs and expenses 870,964 (404,195) 466,769 - - 466,769
------------- ----------- -------------- ------------ ------------- ------------
Loss from operations (3,309,810) 1,493,334 (1,816,476) 1,645,703 - (3,462,179)
Interest expense 4,073,693 125,165 4,198,858 11,500,000(B) 125,165(B) 15,573,693
------------- ----------- -------------- ------------ ------------- ------------
Net income (loss) $ (7,383,503) $ 1,368,169 $ (6,015,334) $(13,145,703) (125,165) $(19,035,872)
============= =========== =============== ============= ============= ============
</TABLE>
Notes to the Unaudited Pro Forma Consolidated Balance Sheet
(A) Reflects the acquisition of Community Refuse and Affiliate accounted for
using the purchase method for total consideration of $30,140,043, and the
elimination of Community Refuse and Affiliate equity as part of recording
the net book value of Community Refuse and Affiliate. The allocation of
purchase price was based on preliminary values and will be subject to final
adjustment. The purchase price was allocated as follows:
Land, buildings and improvements $ 563,000
Rolling stock 781,000
Machinery and equipment 1,270,500
Furniture and fixtures 12,500
Containers and compactors 450,605
Goodwill and other intangible assets 774,895
Landfill costs 26,287,543
------------
$ 30,140,043
============
The entire purchase price of $30,140,043 net of the assumption of
liabilities was assumed to be paid out of Waste System International's
$100,000,000 Senior Notes offering that was consummated on March 2, 1999.
(B) Reflect the Company's $100 million Senior Notes offering, a portion of the
proceeds of which was utilized to purchase Community Refuse and Affiliate.
(C) Reflects assets and liabilities retained by the seller.
Notes to the Unaudited Pro Forma Consolidated Statement of Operations
(A) To reflect adjustment to landfill amortization costs based on the valuation
of the assets acquired.
(B) To reflect interest expense on the $100,000,000 Senior Notes used to
acquire Community Refuse and Affiliate, net of reduction of related
interest expense on Community Refuse Service and Affiliate debt.
