UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2000.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (For the transition period from to ).
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)
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)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
The number of shares of the Registrant's common stock, par value $.01 per share,
outstanding as of May 8, 2000 was 20,348,347.
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999. 1
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999. 2
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999. 3
Notes to Consolidated Financial Statements. 4-8
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations. 9-15
PART II. Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults on Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits, Financial Statements Schedules and Reports
on Form 8-K 16
Signatures 17
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
Assets 2000 1999
------
-------------------- -------------------
(Unaudited)
Current assets:
Cash and cash equivalents $ $ 12,871,773
2,088,105
Accounts receivable, less allowance for doubtful accounts of
$925,000 at March 31, 2000 and $815,000 at December 31,1999 10,374,629 9,294,149
Prepaid expenses and other current assets 2,524,782 2,463,005
-------------------- -------------------
Total current assets 14,987,516 24,628,927
Property and equipment, net (Notes 2 and 3) 174,661,296 174,957,281
Intangible assets, net (Notes 2 and 4) 47,386,623 47,860,406
Other assets 7,876,168 7,646,477
-------------------- -------------------
Total assets $ 244,911,603 $ 255,093,091
==================== ===================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt and notes payable (Note 5) $ 1,851,197 $ 1,383,995
Accounts payable 16,984,728 14,712,075
Accrued expenses 13,108,401 14,734,758
Deferred revenue 1,819,281 1,893,576
-------------------- -------------------
Total current liabilities 33,763,607 32,724,404
Long-term debt and notes payable (Note 5) 134,164,543 172,715,823
Accrued landfill closure and post-closure 1,950,158 2,800,471
-------------------- -------------------
Total liabilities 169,878,308 208,240,698
-------------------- -------------------
Commitments and Contingencies (Note 7)
Stockholders' equity (Notes 5 and 6):
Common stock, $.01 par value. Authorized 75,000,000 shares;
20,348,347 and 20,330,844 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively 203,483 203,309
Series D Preferred Stock $.001 par value. Authorized 1,000,000
shares; 20,500 shares designated and 15,000 shares issued and
outstanding at March 31, 2000 and December 31, 1999. 15,000,000 15,000,000
Series E Preferred Stock $.001 par value. Authorized 1,000,000
shares; 60,000 shares designated and 38,531 shares issued
and outstanding at March 31, 2000. 38,531,000 -
Additional paid-in capital 96,097,292 96,318,442
Accumulated deficit (74,798,480) (64,669,358)
-------------------- -------------------
Total stockholders' equity 75,033,295 46,852,393
-------------------- -------------------
Total liabilities and stockholders' equity $ 244,911,603 $ 255,093,091
==================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
<S> <C> <C>
2000 1999
----------------- -----------------
Revenues $ 16,801,641 $ 8,862,258
Cost of operations:
Operating expenses 13,451,393 5,571,116
Depreciation and amortization 3,777,975 1,752,514
Acquisition integration costs (Note 2) 282,661 544,400
------------ -----------
Total cost of operations 17,512,029 7,868,030
------------ -----------
Gross profit (loss) (710,388) 994,228
Selling, general and administrative expenses 2,868,313 1,913,609
------------ -----------
Loss from operations (3,578,701) (919,381)
------------ -----------
Other income (expense):
Other expenses, net (719,453) (132,402)
Interest income 55,504 168,342
Interest expense and financing costs (4,156,967) (2,006,467)
Non-cash charge for debt conversion (Note 5) - (5,583,717)
------------ -----------
Total other income (expense) (4,820,916) (7,554,244)
------------ -----------
Loss before extraordinary item (8,399,617) (8,473,625)
Extraordinary item - loss on extinguishment of debt (963,172) (223,008)
------------ ------------
Net loss (9,362,789) (8,696,633)
Preferred stock dividends (Note 6) 766,333 -
Net loss available for common shareholders $ (10,129,122) $ (8,696,633)
============== =============
Basic net loss per share:
Loss from continuing operations $ (0.41) $ (0.72)
Extraordinary item (0.05) (0.02)
Preferred stock dividends (0.03) -
----------------- -----------------
Basic net loss per share $ (0.49) $ (0.74)
================= =================
Weighted average number of shares used in
computation of basic net loss per share 20,341,836 11,737,727
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
<S> <C> <C>
2000 1999
-------------- -------------
Cash flows from operating activities:
Net loss $ (10,129,122) $ (8,696,633)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 4,072,845 1,775,970
Increase in allowance for doubtful accounts 110,000 -
Non-cash charge for conversion of debt to equity - 5,583,717
Accrued landfill closure and post-closure costs 191,627 74,244
Extraordinary loss on extinguishment of debt 963,172 223,008
Changes in assets and liabilities:
Accounts receivable (1,190,480) (885,610)
Prepaid expenses and other current assets (61,777) 1,543,673
Accounts payable 2,272,653 403,520
Accrued expenses (982,561) 1,449,618
Deferred revenue (74,295) 263,453
------------------ -----------------
Net cash provided (used) by operating activities (4,827,938) 1,734,960
------------------ -----------------
Cash flows from investing activities:
Net assets acquired through acquisitions - (35,997,173)
Expenditures for property and equipment (2,865,648) (2,178,969)
Landfill closure expenditures (1,041,940) -
Intangible assets (172,090) (443,086)
Other assets (1,427,289) (452,124)
------------------ -----------------
Net cash used by investing activities (5,506,967) (39,071,352)
------------------ -----------------
Cash flows from financing activities:
Deferred financing and registration costs (913) (2,590,393)
Repurchase of common stock - (2,835,022)
Repayments of notes payable and long-term debt (196,874) (20,615,113)
Borrowings from notes payable and long-term debt - 100,000,000
Expenses associated with equity transactions (280,976) -
Proceeds from exercise of stock options 30,000 -
------------------ -----------------
Net cash provided (used) by financing activities (448,763) 73,959,472
------------------ -----------------
Increase (decrease) in cash and cash equivalents (10,783,668) 36,623,080
Cash and cash equivalents, beginning of period 12,871,773 193,613
------------------ -----------------
Cash and cash equivalents, end of period $ 2,088,105 $ 36,816,693
================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated financial statements of Waste Systems
International, Inc. and its subsidiaries ("WSI" or the "Company") include the
accounts of the Company after elimination of all significant intercompany
accounts and transactions. These consolidated financial statements have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) considered
necessary to present fairly the financial position, results of operations and
cash flows at March 31, 2000 and for all periods presented have been made. The
results of operations for the period ended March 31, 2000 are not necessarily
indicative of the operating results for the full year. Certain information and
footnote disclosure normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these consolidated financial
statements presented herein be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K, for the year ended December 31, 1999.
There have been no significant additions to or changes in accounting policies of
the Company since December 31, 1999. For a complete description of the Company's
accounting policies, see Note 2 to Consolidated Financial Statements in the
Company's 1999 Annual Report on Form 10-K.
Note 2. Acquisitions
During 1999, the Company acquired five collection companies and a landfill in
Central Pennsylvania, one collection company in Vermont, two collection
companies, two transfer stations and a paper recycling plant in Eastern New
England, two collection companies and a transfer station in Upstate New York and
a collection company and transfer station in the Washington D.C. region.
The Company defines acquisition integration costs as costs incurred, after an
acquisition is closed, to integrate the acquired operation with the Company's
existing operation. These costs are separate from any obligations or
consideration paid to the seller. These costs include one-time, non-recurring
costs, which in the opinion of Company management have no future value and are
expensed as incurred. The majority of the items identified as acquisition
integration costs are related to: 1). Health and Safety, 2). Name Change, 3).
Information Systems, 4). Employee Severance and Retention and 5). Physical
Operation Relocation Costs. These charges are accrued as the costs are incurred.
While acquisition integration activities are generally completed within one year
from the date of acquisition new expenses and accruals are booked each quarter
as they are incurred. The estimates are reviewed frequently by Company
management and the related operation teams integrating the new acquisitions and
adjusted as required. Acquisition integration costs totaled approximately
$283,000 and $544,000, for the three months ended March 31, 2000 and 1999,
respectively.
The following unaudited pro forma financial information presents the combined
results of operations of the Company and the aggregate of the acquired entities
for the three months ended March 31, 1999, as if the acquisitions had occurred
as of January 1, 1999 after giving effect to certain adjustments, including
amortization of intangibles and additional depreciation of property and
equipment. The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company and the aggregate
of the acquired entities constituted a single entity during such period.
March 31, 1999
Net revenues $ 16,775,000
===============
Loss from operations $ (9,181,000)
===============
Net loss $ (16,958,000)
===============
Basic loss per share $ (0.68)
===============
<PAGE>
Note 3. Property and Equipment
Property and equipment are stated at cost and consist of the following;
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
(Unaudited)
Landfills $ 70,324,617 $ 70,206,638
Transfer stations, buildings and improvements 79,587,274 77,445,686
Machinery and equipment 9,265,649 9,028,635
Rolling stock 16,248,852 16,175,247
Containers and compactors 9,504,312 9,455,373
Capital development costs 4,107,843 4,103,697
Office furniture and equipment 1,907,697 1,665,320
------------- ------------
190,946,244 188,080,596
Less accumulated depreciation and amortization (16,284,948) (13,123,315)
Property and equipment, net $ 174,661,296 $174,957,281
============= =============
</TABLE>
Note 4. Intangible Assets
Intangible assets consist of the following;
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
(Unaudited)
Goodwill $ 40,909,556 $ 40,791,022
Non-compete agreements 5,792,435 5,792,435
Customer lists 4,877,599 4,817,599
Other 745,712 722,161
-------------- -------------
52,325,302 52,123,217
Less accumulated amortization (4,938,679) (4,262,811)
------------- -----------
Total intangible assets $ 47,386,623 $ 47,860,406
============ ============
</TABLE>
Note 5. Long-term debt and notes payable
Long-term debt and notes payable consists of:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
(Unaudited)
11 1/2% Senior Notes $ 84,645,000 $100,000,000
7% Convertible Subordinated Notes 26,719,222 49,551,426
BankNorth Group Credit Facility 17,500,000 17,500,000
10% Convertible Subordinated Debentures 450,000 450,000
Capital Leases 1,081,698 1,104,288
Equipment and Other Notes Payable 5,619,820 5,494,104
------------- ---------
136,015,740 174,099,818
Less current portion 1,851,197 1,383,995
------------- ---------
Long-term portion $ 134,164,543 $172,715,823
============= ============
</TABLE>
Senior Notes Offering and Debt Repayment. On March 2, 1999, the Company
completed a private placement of $100.0 million of 11 1/2% Senior Notes (the
"Senior Notes") and warrants to purchase an aggregate of 1,500,000 shares of the
Company's common stock at an exercise price of $6.25 per share (the "Warrants").
The Senior Notes mature on January 15, 2006 and bear interest at 11 1/2% per
annum, payable semi-annually in arrears on each January 15 and July 15, subject
to prepayment in certain circumstances. The interest rate on the Senior Notes is
subject to adjustment upon the occurrence of certain events as provided in the
Indenture for the Senior Notes. The Senior Notes may be redeemed at the option
of the Company after March 2, 2003 at redemption prices set forth in the Senior
Notes Indenture, together with accrued and unpaid interest. The Warrants are
exercisable through March 2, 2004. The number of shares for which, and the price
per share at which, a Warrant is exercisable, are subject to adjustment upon the
occurrence of certain events as provided in the Warrant Agreement.
Convertible Subordinated Notes. On May 13, 1998, the Company closed an offering
of $60.0 million in 7% Convertible Subordinated Notes. The Notes mature in May
2005, and bear interest at 7.0% per annum, payable semiannually in arrears on
each June 30 and December 31. The shares are convertible at the option of the
holder at any time and can be mandatorily converted by the Company after May 13,
2000, if the Company's Common Stock closing price equals or exceeds the
conversion price of $10.00 per share for a period of 20 consecutive days. On
March 31, 1999, the Company exchanged 2,244,109 shares of the Company's Common
Stock for $10,449,000 of the Notes. The exchange price per share of $4.656 was
equal to the closing of the Common Stock as reported by NASDAQ on that date.
Interest on the Notes totaling approximately $183,000 was paid in cash. In
connection with the conversion of debt into equity, the Company issued 1,199,252
shares of Common Stock in excess of the shares that would have been issued if
the debt had been converted in accordance with its original terms. The Company
recorded a non-cash charge of $5,583,717 attributable to the issuance of these
additional shares of Common Stock, which has been offset in consolidated
stockholders' equity by the additional deemed proceeds from the issuance of the
shares.
Exchange. On February 15, 2000, the Company closed an Exchange Offer for its
$49,551,000 of Convertible Subordinated Notes due 2005 and its $100,000,000
Senior Notes due 2006. Approximately $15,355,000 principal amount of, plus
accrued but unpaid interest on, its 11 1/2% Senior Notes due 2006 and
approximately $22,832,000 principal amount of, plus accrued but unpaid interest
on, its 7% Convertible Subordinated Notes due 2005 were tendered and exchanged
into shares of the Company's newly designated Series E Convertible Preferred
Stock which carry an 8% dividend which is payable in kind or cash at the option
of the Company. The Company issued an aggregate of 38,531 shares of its Series E
Convertible Preferred Stock. The preferred stock is redeemable at any time by
the Company at par plus accrued and unpaid dividends and can be converted into
shares of the Company's common stock at a price of $8.00 per share at any time
at the option of the holder and can be mandatorily converted by the Company if
its common stock closing price equals or exceeds $8.00 for a period of twenty
consecutive trading days.
Credit Facility. On August 3, 1999, the Company entered into a $25 million
secured revolving credit facility with The BankNorth Group, N.A. to fund
acquisitions and for general working capital purposes. The revolving credit
agreement has a term of three years, provides for an interest rate based on
LIBOR or Prime, and includes other terms and conditions customary for secured
revolving credit facilities. At March 31, 2000 and December 31, 1999, the
Company had borrowed $17,500,000 against the credit facility and the interest
rate was 9.75% and 9.5% at March 31, 2000 and December 31, 1999, respectively.
At March 31, 2000, the Company did not meet certain financial covenants under
the credit facility. The Company is currently working with the BankNorth Group
to amend the covenants.
10% Convertible Subordinated Notes. During 1995, the Company closed a
"Regulation S" offering of $11,225,000 in Convertible Subordinated Notes and
Warrants to overseas investors, which resulted in net proceeds to the Company of
approximately $10,000,000. The Notes mature on September 30, 2000, and bear
interest at 10%, payable quarterly. The notes were partially paid back as a
result of the Senior Notes Offering. There was $450,000 outstanding, at both
March 31, 2000 and December 31, 1999.
Capital Leases. The Company leases certain facilities, equipment, and vehicles
under agreements, which are classified as capital leases.
Equipment and Other Notes Payable. The Company has entered into various
financing agreements for certain rolling stock and other machinery and
equipment. These agreements range from three to five years with interest rates
between 8% and 10%. The notes are secured by the related pieces of rolling stock
or machinery and equipment
<PAGE>
Note 6. Preferred Stock
On February 15, 2000, the Company closed an Exchange Offer for its $49,551,426
of Convertible Subordinated Notes due 2005 and its $100,000,000 Senior Notes due
2006. Approximately $15,355,000 principal amount of, plus accrued but unpaid
interest on, its 11 1/2% Senior Notes due 2006 and approximately $22,832,000
principal amount of, plus accrued but unpaid interest on, its 7% Convertible
Subordinated Notes due 2005 were tendered and exchanged into shares of the
Company's newly designated Series E Convertible Preferred Stock which carry an
8% dividend which is payable in kind or cash at the option of the Company. The
Company issued an aggregate of 38,531 shares of its Series E Convertible
Preferred Stock. The preferred stock is redeemable at any time by the Company at
par plus accrued and unpaid dividends and can be converted into shares of the
Company's common stock at a price of $8.00 per share at any time at the option
of the holder and can be mandatorily converted by the Company if its common
stock closing price equals or exceeds $8.00 for a period of twenty consecutive
trading days. At March 31, 2000, the Company accrued a dividend of approximately
$380,000 related to the Series E Preferred Stock.
On December 28, 1999, the Company raised $15 million through a private placement
of Series D Convertible Preferred. The Series D Preferred Stock carries a 10%
dividend which is payable in kind or cash at the option of the Company. The
Preferred Stock can be converted into shares of the Company's Common Stock at a
price of $6.00 per share at any time at the option of the holder and can be
mandatorily converted by the Company if its common stock closing price equals or
exceeds $9.00 for a period of twenty consecutive trading days. Finally, the
Preferred Stock is eligible to vote on an as-converted basis with the Company's
Common Stock and is redeemable at any time by the Company. At March 31, 2000,
the Company accrued a dividend of approximately $386,000 related to the Series D
Preferred Stock.
Note 7. Commitments and Contingencies
In the normal course of its business, and as a result of the extensive
governmental regulation of the solid waste industry, the Company periodically
may become subject to various judicial and administrative proceedings involving
federal, state, or local agencies. In these proceedings, an agency may seek to
impose fines on the Company or to revoke or deny renewal of an operating permit
held by the Company. From time to time, the Company also may be subjected to
actions brought by citizens' groups in connection with the permitting of its
landfills or transfer stations, or alleging violations of the permits pursuant
to which the Company operates. Certain federal and state environmental laws
impose strict liability on the Company for such matters as contamination of
water supplies or the improper disposal of waste. The Company's operation of
landfills subjects it to certain operational, monitoring, site maintenance,
closure and post-closure obligations which could give rise to increased costs
for monitoring and corrective measures.
The Company has environmental impairment liability insurance policies at each of
its operating landfills which covers claims for sudden or gradual onset of
environmental damage. If the Company were to incur liability for environmental
damage in excess of its insurance limits, its financial condition could be
adversely affected. The Company carries a comprehensive general liability
insurance policy which management considers adequate at this time to protect its
assets and operations from other risks.
None of the Company's landfills are currently connected with the Superfund
National Priorities List or potentially responsible party issues.
The Company is party to pending legal proceedings and claims. Although the
outcome of such proceedings and claims cannot be determined with certainty, the
Company's management, after consultation with outside legal counsel, is of the
opinion that the expected final outcome should not have a material adverse
effect on the Company's financial position, results of operations or liquidity.
Note 8. Segment Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Operating segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to allocate resources
and in assessing their performance. The Company's chief operating decision-maker
is the Chief Executive Officer.
The Company manages its business segments according to how they are integrated
between hauling, transfer and landfill operations. The Eastern New England -
Boston area and Washington D.C. operations are integrated with the Central
Pennsylvania operations, disposing of their waste in Central Pennsylvania. The
Vermont operation is primarily integrated within itself. These four operations
are grouped together by management and evaluated as one unit. While the
operations have separate management teams, their operating results are evaluated
on a combined basis taking into consideration all intercompany transactions and
eliminations. The Upstate New York and Central Massachusetts operations are not
integrated and are reviewed together as non-integrated operations. Each
operating segment provides services as further described in Note 1 of the
December 31, 1999 Consolidated Financial Statements. The accounting policies of
the various segments are the same as those described in the "Summary of
Significant Accounting Policies" in Note 2 of the December 31, 1999 Consolidated
Financial Statements. The Company evaluates the performance of its segments
based on operating income (loss), EBITDA and Adjusted EBITDA. Operating income
(loss) for each segment includes all expenses directly attributable to the
segment, including acquisition related costs, and excludes certain expenses that
are managed outside the reportable segments. Costs excluded from segment profit
primarily consist of corporate expenses. Corporate expenses are comprised
primarily of information systems and other general and administrative expenses
separately managed. EBITDA is defined as operating income or loss from
continuing operations excluding depreciation and amortization, which includes
depreciation and amortization included in selling, general and administrative
expenses. EBITDA does not represent, and should not be considered as an
alternative to, net income or cash flows from operating activities, each as
determined in accordance with GAAP. Adjusted EBITDA represents EBITDA plus
one-time charges associated with the write-off of landfill development costs,
acquisition integration costs and restructuring costs. Segment assets exclude
corporate assets. Corporate assets include cash and cash equivalents, office
equipment and other assets. Capital expenditures for long-lived assets are not
reported to management by segment and are excluded, as presenting such
information is not practical.
Summary information by segment as of and for the three months ended March 31,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Integrated Regions 2000 % 1999 %
- ------------------ ---- ----- ---- -----
Revenue $13,877,787 100.0% $5,604,349 100.0%
Income (loss) from continuing operations (1,611,650) (11.6%) 458,479 8.2%
Depreciation and amortization 3,315,297 23.9% 1,375,580 24.5%
Acquisition integration costs 265,069 1.9% 185,704 3.3%
EBITDA 1,807,935 13.0% 1,828,276 32.6%
Adjusted EBITDA 2,073,004 14.9% 2,013,931 35.9%
Net interest expense (99,126) (0.7%) (36,614) (0.7%)
Segment assets 207,189,522 - 106,209,237 -
Non-Integrated Regions
Revenue 2,923,854 100.0% 3,257,909 100.0%
Income (loss)from continuing operations (790,592) (27.0%) (349,001) (10.7%)
Depreciation and amortization 494,239 16.9% 376,935 11.6%
Acquisition integration costs 17,592 0.6% 358,696 11.0%
EBITDA (296,352) (10.1%) 27,884 0.9%
Adjusted EBITDA (278,760) (9.5%) 386,629 11.9%
Net interest expense - - (18) 0.0%
Segment assets 32,983,366 - 28,110,357 -
Corporate and Other
Revenue - - - -
Income (loss) from continuing operations (1,176,459) - (1,028,859) -
Depreciation and amortization 29,652 - - -
Acquisition integration costs - - - -
EBITDA (1,250,313) - (999,571) -
Adjusted EBITDA (1,250,313) - (999,571) -
Net interest expense (4,002,337) - (1,801,493) -
Segment assets 4,738,715 - 39,564,527 -
TOTAL
Revenue 16,801,641 100.0% 8,862,258 100.0%
Income (loss) from continuing operations (3,578,701) (21.3%) (919,381) (10.4%)
Depreciation and amortization 3,839,188 22.5% 1,752,515 19.8%
Acquisition integration costs 282,661 1.7% 544,400 6.1%
EBITDA 261,270 1.6% 856,589 9.7%
Adjusted EBITDA 543,931 3.2% 1,400,989 15.8%
Net interest expense (4,101,463) (24.4%) (1,838,125) (20.7%)
Segment assets 244,911,603 - 173,884,121 -
</TABLE>
Note 9. Supplemental disclosures of cash flow information:
During the three months ended March 31, 2000 and 1999, cash paid for interest
was $7,237,000 and $620,903, respectively.
On February 15, 2000, the Company exchanged $22,832,204 of its $49,551,426 of
Convertible Subordinated Notes due 2005; $15,355,000 of its $100,000,000 Senior
Notes due 2006 and $346,934 of accrued interest for 38,531 shares of its Series
E Preferred Stock.
On March 31, 1999, the Company exchanged 2,244,109 shares of the Company's
Common Stock for $10,449,000 of its 7% Subordinated Notes. The Company incurred
a non-cash charge of $5,583,717 in connection with this conversion of debt into
equity.
In connection with the Company's acquisitions, during the first quarter of 1999,
the Company acquired property and equipment of $30.3 million, intangible assets
of $7.5 million and other assets of $0.1 million. The Company paid approximately
$36.0 million in cash and assumed liabilities from the acquired companies of
$1.9 million.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This quarterly report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, with respect to, among other things, the
Company's future revenues, operating income, or earnings per share. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects" or words of similar expression. The Company's actual
results could differ materially from those set forth in the forward-looking
statements. Certain factors that might cause such a difference are discussed
herein. See "Certain Factors Affecting Future Operating Results".
Introduction
Waste Systems International, Inc. (the "Company" or "WSI") is an integrated
non-hazardous solid waste management company that provides solid waste
collection, recycling, transfer and disposal services to commercial, industrial,
residential and municipal customers within certain regional markets in the
Northeast and Mid-Atlantic states where it operates. The Company focuses on the
operation of an integrated non-hazardous solid waste management business,
including the ownership and operation of solid waste disposal facilities
(landfills), transfer stations and solid waste collection services. The Company
derives revenue from collecting solid waste from its customers, which it
delivers for disposal in its own landfills, and also from unaffiliated waste
collection companies who pay to dispose of waste in the Company's landfills. The
Company seeks to acquire substantial collection operations and transfer stations
in association with its landfills in order to enhance its overall profitability
and to increase its control over its sources of revenue.
At March 31, 2000, the Company owned and operated one landfill in Vermont and
three landfills in Central Pennsylvania. The Company's Moretown Landfill in
Vermont is permitted to accept 120,000 tons of municipal solid waste ("MSW") per
year. The Company's Sandy Run Landfill in Hopewell, Pennsylvania is permitted to
accept 86,000 tons of MSW per year. Both of these landfills were in operation
for all of 1999. On March 1, 1999, the Company acquired the Community Refuse
Services landfill located in Shippensberg, Pennsylvania, just outside of
Harrisburg, Pennsylvania. This landfill is permitted to accept 309,000 tons of
MSW per year. On December 28, 1999 the Company completed construction and opened
the Mostoller Landfill in Somerset, Pennsylvania. This landfill is permitted to
accept 624,000 tons of MSW per year. As of March 31, 2000, the aggregate
remaining estimated permitted capacity of the Company's four owned landfills was
approximately 22.7 million cubic yards. In addition, the Company has contracted
with the Town of South Hadley, Massachusetts to operate the Town's landfill,
which has an estimated capacity of approximately 1.2 million cubic yards
available for future disposal. Providing there are no unexpected permitting
delays, the Company expects to begin construction of that landfill during the
last half 2000 and projects the landfill to begin operating in 2001. The Company
also owns and operates five transfer stations and has acquired two additional
transfer stations that are permitted and are under construction. As of March 31,
2000, the Company's collection operations served a total of approximately 73,000
commercial, industrial, residential and municipal customers in the Central
Pennsylvania, Eastern New England, Upstate New York, Vermont and Washington DC
markets.
The following table provides certain information regarding the 5 landfills owned
or operated by the Company as of March 31, 2000.
Total Currently Remaining
Site Permitted Permitted
Landfill Name Location Acreage Acreage Capacity (cu yds)
------------- -------- ------- --------- -----------------
Mostoller Somerset, PA 715 278.1 14,125,000
Sandy Run Hopewell, PA 711 39.6 2,596,000
Moretown Moretown, VT 200 33.7 1,218,000
Cumberland Cumberland, PA 627 104.7 4,772,000
South Hadley South Hadley, MA 30 -- --(1)
(1) The South Hadley landfill is currently in the permitting process and will be
operated pursuant to an operating agreement expiring in 2015.
The Company focuses on the operation of an integrated non-hazardous solid waste
management business, including the ownership and operation of landfills, solid
waste collection services and transfer stations. The Company's objective is to
expand the current geographic scope of its operations primarily within the
Northeast and Mid-Atlantic regions of the United States, and to become one of
the leading providers of non-hazardous solid waste management services in each
local market that it serves. The key elements of the Company's strategy for
achieving its objective are: (i) to acquire and integrate solid waste disposal
capacity, transfer stations and collection operations in its targeted new
markets, (ii) to generate internal growth through increased sales penetration
and the marketing of additional services to existing customers and (iii) to
enhance profitability by increasing operating efficiency.
Throughout 1999, the Company pursued an active acquisition strategy to achieve
its objective of expanding the current geographical scope of its operations and
becoming a leading provider of integrated solid waste management services in
each of the markets it serves. The Company's three-step acquisition program was
designed to (i) acquire long-term disposal capacity in targeted regional
markets, (ii) acquire collection companies and transfer stations which will
serve as platforms in the targeted regions to secure a stable long-term waste
flow, and (iii) secure "tuck-in acquisitions" of small but complementary
collection companies to increase a regional operation's profitability.
During 1999, the Company acquired five collection companies and a landfill in
Central Pennsylvania, one collection company in Vermont, two collection
companies, two transfer stations and a paper recycling plant in Eastern New
England, two collection companies and a transfer station in Upstate New York and
a collection company and transfer station in the Washington D.C. region. During
1998, the Company completed 34 acquisitions within its five current operating
regions.
The Company does not expect to pursue any acquisitions during the remainder of
2000. The Company may consider additional acquisitions at a later date. During
2000, the primary focus of the Company will be the on-going integration current
operations. The Company will continue to optimize the value of its landfill,
transfer and collection assets through internalization of waste collected by the
Company, internal growth through sales and marketing efforts and operating
efficiencies.
Internalization of Waste
Throughout 1999 and during the three months ended March 31, 2000, the Company
increased the amount of waste collected by the Company that was subsequently
disposed at Company landfills, and increased the amount of the waste delivered
for disposal at the Company's landfills that was collected by the Company.
During the three months ended March 31, 2000, over 95% of the waste from the
Company's Vermont operations was delivered for disposal at the Moretown Landfill
and approximately 39% of the waste delivered for disposal at the Moretown
Landfill during this period was collected by the Company. In addition,
approximately 93% of the waste from the Company's Central Pennsylvania - Altoona
division operations was delivered for disposal at the Sandy Run Landfill and
approximately 79% of the waste delivered for disposal at the Sandy Run Landfill
during this period was collected by the Company. Approximately 92% of the waste
from the Company's Central Pennsylvania - Harrisburg division operations was
delivered for disposal at the Community Refuse, Inc. landfill and approximately
34% of the waste delivered for disposal at the Community Refuse Services
landfill during this period was collected by the Harrisburg division and other
company regions. The Washington, D. C. operation disposed of approximately 95%
of its waste at the Community Refuse Services and Mostoller landfills. The
Eastern New England - Boston area operation disposed of approximately 86% of its
waste at the Community Refuse Services landfill. The Upstate New York and
Central Massachusetts operations do not internalize any of their waste at
Company owned landfills. The Company continues to seek opportunities to
internalize the waste from these regions.
Results of Operations
Because of the relative significance of the acquired business' operations to the
Company's financial performance relating to the acquisitions consummated in 1998
and 1999, the Company does not believe that its historical financial statements
are necessarily indicative of future performance and as a result will affect the
comparability of the financial information included herein.
Revenues:
Revenues represent fees charged to customers for solid waste collection,
transfer, recycling and disposal services provided. Arrangements with customers
include both long-term contractual arrangements and as-received disposal at
prices quoted by the Company. Revenues for the periods presented in the
consolidated statements of operations were derived from the following sources:
Three months ended
March 31,
2000 1999
---- ----
Collection 74.0% 85.5%
Landfill 10.0 10.4
Transfer 16.0 4.1
------- -------
Total Revenue 100.0% 100.0%
======= =======
For the purpose of this table, revenue is primarily attributed to the operation
where the Company first receives the waste. For example, revenue received from
waste collected by the Company and disposed in a Company landfill is entirely
attributed to collection. During 2000, the change in revenue mix is primarily
attributable to the transfer stations the Company acquired July 1, 1999. Both of
these acquired companies transfer stations derived a significant portion of
their revenues from third parties. These transfer stations were not owned by the
Company during the first quarter of 1999.
Revenues increased by approximately $7,940,000, or 90% to approximately
$16,802,000 for the three month period ended March 31, 2000 compared with
$8,862,000 for the same period in 1999. The increase was primarily due to the
impact of operations acquired during the second and third quarters of 1999. See
Note 2 to the Consolidated Financial Statements.
Operating Expenses:
The following table sets forth, for the periods indicated, certain data derived
from the Company's Consolidated Statement of Operations, expressed as a
percentage of revenues:
Three months ended
March 31,
2000 1999
---- ----
Revenues 100.0% 100.0%
Operating expenses 80.1 62.9
Depreciation and amortization 22.5 19.8
Acquisition integration costs 1.7 6.1
------ ------
Total cost of operations 104.3 88.8
------ ------
Gross profit/(loss) (4.3) 11.2
Selling, general and administrative expenses 17.1 21.6
------ ------
Loss from operations (21.4) (10.4)
Other expenses, net (4.3) (1.5)
Interest income .3 1.9
Interest expense and financing costs (24.7) (22.6)
Non-cash charge for debt conversion - (63.0)
Extraordinary item (5.7) (2.5)
------ --------
Net loss (55.8) (98.1)
Preferred stock dividends 4.5 -
------- -------
Net loss available for common stockholders (60.3)% (98.1)%
======= =======
Operating expenses increased approximately $7,880,000, or 141%, to $13,451,000
from $5,571,000 for the three months ended March 31, 2000, compared with the
same period in 1999. As a percentage of revenues, operating expenses increased
from 62.9% in the first quarter of 1999 to 80.6% in the first quarter of 2000.
Operating expenses increased primarily due to the acquisitions completed in the
last three quarters of 1999. The increase in operating expenses as a percentage
of revenues was primarily due to increased transportation costs incurred as the
Company disposed of waste collected from the Eastern New England region at its
landfills in Central Pennsylvania. In addition, the Company experienced higher
fuel costs during the first quarter of 2000 due to increased prices. The Company
also had higher than normal repairs and maintenance costs on its rolling stock.
Finally, the Company had increased labor costs as it ramped up operations at its
Somerset, PA region and also at its Vermont and Eastern New England regions.
Depreciation and amortization expense includes depreciation of property and
equipment over their useful lives using the straight-line method, amortization
of goodwill and other intangible assets over their useful lives using the
straight-line method, and amortization of landfill development costs using the
units-of-production method. Depreciation and amortization expense increased
$2,025,000 or 116% to $3,778,000 for the three months ended March 31, 2000 from
$1,753,000 for the comparable period in 1999. The increase is the result of
increased depreciation costs of the additional assets acquired through
acquisition and increased amortization due to substantial increases in
intangible assets related to acquisitions. Additionally, amortization of
landfill development costs increased as a result of the increase in the amount
of waste accepted at the Company's Moretown landfill and the additions of the
Sandy Run and Community Refuse, Inc. landfills in Central Pennsylvania. As a
percentage of revenues, depreciation and amortization expense increased to 22.5%
in the first quarter of 2000 from 19.8% in the first quarter of 1999. The
increase in depreciation and amortization expense as a percentage of revenues is
primarily attributable to capital expenditures during the last three quarters of
1999.
Acquisition integration costs are costs incurred, after an acquisition is
closed, to integrate the acquired operation with the Company's existing
operation. These costs are separate from any obligations or consideration paid
to the seller. These costs include one-time, non-recurring costs, which in the
opinion of Company management have no future value and are expensed as incurred.
The majority of the items identified as Acquisition Integration Costs are
related to: 1). Health and Safety, 2). Name Change, 3). Information Systems, 4).
Employee Severance and Retention, and 5). Physical Operation Relocation Costs.
These charges are accrued as the costs are incurred. While acquisition
integration activities are generally completed within one year from the date of
acquisition, expenses and accruals are booked each quarter as they are incurred.
Acquisition integration costs totaled approximately $283,000 and $544,400, for
the three months ended March 31, 2000 and 1999, respectively.
Selling, general and administrative expenses consist of corporate development
activities, marketing and public relations costs, administrative compensation
and benefits, legal and accounting and other professional fees as well as other
administrative costs and overhead. Selling, general and administrative costs
increased approximately $954,000, or 50%, to $2,868,000 for the three month
period ended March 31, 2000 from $1,914,000 in the comparable period in 1999. As
a percentage of revenue, selling, general and administrative expenses decreased
to 17.1% for the three months ended March 31, 2000 from 21.6% for the same
period in 1999. The dollar increase was due to efforts by the Company to build
an infrastructure to sustain its significant growth through acquisition and to
support the several corporate initiatives designed to implement its strategy.
The decrease as a percentage of revenue was primarily due to the expanded
revenue base and related efficiencies.
Interest income decreased $113,000, or 67%, to $56,000 for the three months
ended March 31, 2000, from $168,000 in the comparable period in 1999. The
decrease was the result of lower average cash and investment balances.
Interest expense and financing costs, net of capitalized interest costs
increased $2,151,000, or 107%, to $4,157,000 for the three month period ended
March 31, 2000, from $2,006,000 for comparable period in 1999. The increase
resulted primarily from increased indebtedness incurred in connection with the
11 1/2% Senior Notes, the 7% Convertible Subordinated Notes and other debt.
Interest is capitalized on landfill development costs related to permitting,
site preparation, and facility construction during the period that these assets
are undergoing activities necessary for their intended use.
Other expenses were $719,000 and $132,000 for the three month periods ended
March 31, 2000 and 1999, respectively. Such expenses primarily relate to the
write-off of acquisition related expenses.
The net loss for the three months ended March 31, 1999 includes a non-cash
charge of $5,584,000 in connection with the conversion of debt into equity.
EBITDA:
EBITDA is defined as operating income from continuing operations plus
depreciation and amortization, which includes depreciation and amortization
included in selling, general and administrative expenses. EBITDA does not
represent, and should not be considered as an alternative to net income or cash
flow from operating activities, each as determined in accordance with generally
accepted accounting principles ("GAAP"). Moreover, EBITDA does not necessarily
indicate whether cash flow will be sufficient for such items as working capital,
capital expenditures, or to react to changes in the Company's industry or to the
economy in general. The Company believes that EBITDA is a measure commonly used
by lenders and certain investors to evaluate a company's performance in the
solid waste industry. The Company also believes that EBITDA data may help to
understand the Company's performance because such data may reflect the Company's
ability to generate cash flows, which is an indicator of its ability to satisfy
its debt service, capital expenditures and working capital requirements.
However, functional or legal requirements may require the conservation of funds
for uses other than those previously described. Because EBITDA is not calculated
by all companies and analysts in the same fashion, investors should consider,
among other factors: the non-GAAP nature of EBITDA; actual cash flows; the
actual availability of funds for debt service, capital expenditures and working
capital; and the comparability of the Company's EBITDA data to similarly-titled
measures reported by other companies. Adjusted EBITDA consists of EBITDA, as
defined above, excluding non-recurring charges.
The following table sets forth, for the periods indicated, certain data derived
from the Company's Consolidated Statement of Operations, to determine EBITDA and
Adjusted EBITDA:
Three months ended
March 31,
2000 1999
------------- -------------
Loss from operations ($ 3,578,701) ($ 919,381)
Depreciation and amortization 3,839,188 1,775,970
------------- ------------
EBITDA 260,487 856,589
Acquisition integration costs 282,661 544,400
------------- ------------
Adjusted EBITDA $ 543,148 $ 1,400,989
============= ============
EBITDA as a % of revenue 1.6% 9.7%
============= ============
Adjusted EBITDA as a % of revenue 3.2% 15.8%
============= ============
Financial Position
WSI had approximately $2.1 million in cash as of March 31, 2000. This represents
a decrease of approximately $10.1 million from $12.9 million in December 31,
1999. The Company had negative working capital of approximately ($18.8) million
as of March 31, 2000, a decrease of approximately $8.2 million from ($8.2)
million in March 31, 1999.
At March 31, 2000, the Company had approximately $11.3 million in trade accounts
receivables. The Company has estimated an allowance for doubtful accounts of
approximately $925,000, which is considered sufficient to cover future bad
debts.
The Company's business is capital intensive. The Company's capital requirements,
which are substantial, include property, equipment, capital expenditures for
landfill cell construction, landfill development and landfill closure
activities. Principally due to these factors, the Company may incur working
capital deficits. The Company plans to meet its capital needs through various
financing sources, including internally generated funds, equity securities and
debt.
On May 13, 1998, the Company closed on an offering of $60.0 million 7%
Convertible Subordinated Notes which resulted in net proceeds to the Company of
approximately $58.3 million. On March 2, 1999, the Company completed a private
offering of 11 1/2% Senior Notes in the aggregate principal amount of $100
million due January 15, 2006 which resulted in net proceeds to the Company of
approximately $97.3 million. In August 1999, the Company issued 2,239,745 shares
of its common stock at $7 per share in a private placement for proceeds totaling
approximately $15.7 million. In December 1999, the Company issued 15,000 shares
of Series D Preferred Stock in a private placement for proceeds totaling
approximately $15 million. The Company has used the proceeds from these debt and
equity offerings to complete various acquisitions and construction projects. In
March 1999, approximately $10,390,000 of the 7% Convertible Subordinated Notes
were exchanged into common stock through an exchange offering. On February 15,
2000 approximately $22.8 million of the 7% Convertible Subordinated Notes and
approximately $15.4 million of the 11 1/2% Senior Notes, plus accrued interest
were exchanged into an aggregate of 38,531 shares of the Company's Series E
Convertible Preferred Stock through an exchange offering.
During the three months ended March 31, 2000 the Company continued development
and construction activities on several capital projects. There can be no
assurance that additional debt or equity financing will be available, or
available on terms acceptable to the Company. Any failure of the Company to
obtain required financing would have a material adverse effect on the Company's
financial condition and results of operation. Additions to property and
equipment during the three months ended March 31, 2000, were approximately $2.9
million.
The Company used net cash from operating activities for the three months ended
March 31, 2000 of approximately $4,828,000. During the same period in 1999, the
Company generated net cash $1,735,000 from operating activities. The decreased
cash flow from operations in 2000 was due primarily to the increased revenues,
which were offset by related increases in cost of operations and selling,
general and administrative expenses. In addition, the Company paid cash for
interest expense of approximately $7.2 million. The remainder of the cash flow
decrease was due to changes in the operating assets and liabilities including an
increase in accounts payable, offset by decreases in accrued expenses and
deferred revenue and an increase in accounts receivable .
EBITDA decreased by $597,000 during the first quarter of 2000 to approximately
$260,000 from EBITDA of $857,000 during the same period in 1999. As a percentage
of revenue, EBITDA decreased to 1.6% during the first quarter of 2000 from 9.7%
in the first quarter of 1999. Adjusted EBITDA decreased by $858,000 during the
first quarter of 2000 to $543,000 from $1,401,000 during the same period in
1999. As a percentage of revenue, Adjusted EBITDA decreased to 3.2% during the
first quarter of 2000 from 15.8% in the first quarter of 1999.
Net cash used by investing activities during the first three months of 2000 was
$5,507,000 compared to $39,071,000 in the same period in 1999. Capital
expenditures of approximately $2.9 million were made in connection with ongoing
construction projects and to increase operating efficiencies at the Company's
existing operations.
Net cash used by financing activities during the first three months of 2000 was
approximately $494,000. The primary uses of cash were approximately $200,000 for
the principal payment of debt and $281,000 for expenses associated with the
Exchange transaction, see footnote 5.
During August 1999, the Company entered into a $25 million secured revolving
credit facility with The BankNorth Group, N.A. to fund acquisitions and for
general working capital purposes. The revolving credit agreement has a term of
three years, provides for an interest rate based on LIBOR or Prime, and includes
other terms and conditions customary for secured revolving credit facilities. At
December 31, 1999 and March 31, 2000, the Company had borrowed $17.5 million
against the credit facility.
On April 20, 2000, the Company entered into a back-up $7.5 million subordinated
revolving credit facility with BIII Capital Partners, LP, which is a significant
shareholder of the Company, for general working capital purposes. The credit
agreement has a term of one year, provides for an interest rate of 20%, and
includes other terms and conditions customary for revolving credit facilities.
At March 31, 2000, the Company had approximately $136.0 million of short-term
and long-term debt.
The Company does not believe its operations have been materially affected by
inflation.
Based upon its current operating plan, the Company believes that its cash and
cash equivalents, available borrowing capacity, future cash flow from operations
and the proceeds of future debt and equity financings will satisfy the Company's
working capital needs for the foreseeable future. However, there can be no
assurances in this regard. See Certain Factors Affecting Future Operating
Results.
Certain Factors Affecting Future Operating Results
The following factors, as well as others mentioned in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, (filed March 30,
2000), could cause actual results to differ materially from those indicated by
forward-looking statements made in this Quarterly Report on Form 10-Q:
- Our history of losses makes investment in Waste Systems highly speculative;
- Our high level of indebtedness could adversely affect our financial health;
- Incurring more debt could further exacerbate the risks of our high level of
indebtedness;
- We may not generate enough cash to service our indebtedness or our other
liquidity needs;
- We have no control over many factors in our ability to finance planned
growth;
- Our future success depends upon our ability to manage rapid growth in
operations and personnel;
- Our future success depends upon our ability to integrate acquisitions;
- Loss of key executives could affect Waste Systems' ability to achieve our
business objectives;
- Failed acquisitions or projects may adversely affect our results of
operations and financial condition;
- Our business may not succeed due to the highly competitive nature of the
solid waste management industry;
- Seasonal revenue fluctuations may negatively impact our operations;
- The geographic concentration of our operations magnifies the risks to our
success;
- Potential difficulties in acquiring landfill capacity could increase our
costs;
- Failure to obtain landfill closure performance bonds and letters of credit
may adversely affect our business;
- Estimated accruals for landfill closure and post-closure costs may not meet
our actual financial obligations;
- Environmental and other government regulations impose costs and uncertainty
on our operations;
- We are exposed to potential liability for environmental damage and
regulatory noncompliance;
- Our environmental liability insurance may not cover all risks of loss; and
- Addressing local community concerns about our operations may adversely
affect our business.
<PAGE>
PART II
Item 1. Legal Proceedings
Legal Matters. The Company is party to pending legal proceedings and claims.
Although the outcome of such proceedings and claims cannot be determined with
certainty, the Company's management, after consultation with outside legal
counsel, is of the opinion that the expected final outcome should not have a
material adverse effect on the Company's financial condition, results of
operations or liquidity.
Item 2. Changes in Securities
On February 15, 2000, the Company closed an Exchange Offer for its $49,551,426
of Convertible Subordinated Notes due 2005 and its $100,000,000 Senior Notes due
2006. Approximately $15,355,000 principal amount of, plus accrued but unpaid
interest on, its 11 1/2% Series B Senior Notes due 2006 and approximately
$22,832,000 principal amount of, plus accrued but unpaid interest on, its 7%
Convertible Subordinated Notes due 2005 were tendered and exchanged into shares
of the Company's newly designated Series E Convertible Preferred Stock which
carry an 8% dividend which is payable in kind or cash at the option of the
Company. The Company issued an aggregate of 38,531 shares of its Series E
Convertible Preferred Stock.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A) 1. Financial Statements
The financial statements are listed under Part I, Item 1 of this
Report.
2. Financial Statement Schedules
None.
3. Exhibits
None.
(B) Reports on Form 8-K
On January 18, 2000, the Company filed a Current Report on Form 8-K,
whereby it announced the commencement of an exchange offer to issue
shares of a newly designated series of convertible preferred stock in
exchange for the Company's 11 1/2% Senior Notes due 2006, 11 1/2%
Series B Senior Notes due 2006 and 7% Convertible Subordinated Notes
due 2005.
On March 21, 2000, the Company filed a Current Report on Form 8-K,
whereby its announced the completion of the exchange offers for its 11
1/2% Senior Notes due 2006, 11 1/2% Series B Senior Notes due 2006 and
its 7% Convertible Subordinated Notes due 2005.
<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 15, 2000 By: /s/ Philip Strauss
------------ ----------------------------
Philip Strauss
Chairman, Chief Executive Officer and
President
(Principal Executive Officer)
Date: May 15, 2000 By: /s/ James Elitzak
------------ ----------------------------
James Elitzak
Vice President and Chief Financial
Officer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Waste
Systems International, Inc.'s balance sheet and income statement for the period
ended March 31, 2000 and is qualified in its entirety by reference to such 10-Q
filing.
</LEGEND>
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<NAME> Waste Systems International, Inc
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