SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-25998
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)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, $.01 par value per share
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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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X
As of March 24, 2000, the market value of the voting stock of the
Registrant held by non-affiliates of the Registrant was $45,606,693
The number of shares of the Registrant's common stock, par value $.01 per
share, outstanding as of March 24, 2000 was 20,348,297
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K.
Portions of the Registration Statement on Form S-1 of Waste Systems
International, Inc. (No. 33-93966) are incorporated by reference into Part IV of
this Form 10-K.
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TABLE OF CONTENTS
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Page
PART I
Item 1. Business 2
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 49
PART III
Item 10. Directors and Executive Officers 50
Item 11. Executive Compensation 53
Item 12. Security Ownership of Certain Beneficial Owners and Management 56
Item 13. Certain Relationships and Related Transactions 59
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 60
Signatures 62
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Note Regarding Forward Looking Statements:
This Annual Report on Form 10-K contains forward-looking statements concerning
among other things, the Company's expected future revenues, operations and
expenditures and estimates of the potential markets for the Company's services.
Such statements made by the Company fall within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All such forward-looking statements are
necessarily only estimates of future results and the actual results achieved by
the Company may differ materially from these projections due to a number of
factors as discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Certain Factors
Affecting Future Operating Results" of this Form 10-K.
PART I
Item 1. Business
The Company
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 is
achieving significant growth by implementing an active acquisition strategy.
During 1999, the Company completed 13 acquisitions of collection companies,
transfer stations and a landfill. At December 31, 1999, 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 Cumberland 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 December 31,
1999, the aggregate remaining estimated permitted capacity of the Company's four
owned landfills was approximately 22.6 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 1.87
million cubic yards available for future disposal. The Company expects to begin
construction of that landfill during the third quarter of 2000 and projects the
landfill to begin operating in the fourth quarter of 2000. 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 December 31, 1999,
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 Baltimore
Maryland/Washington DC markets.
During 1998, the Company acquired a total of 34 companies including two
landfills, 31 collection companies (2 of which included a transfer station) and
one transfer station. These acquisitions were located in Vermont, Eastern New
England, Upstate New York and Central Pennsylvania.
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.
Industry Overview
The solid waste management industry is generally experiencing
significant consolidation and integration. The Company believes that the
consolidation and integration is a result of the following factors, among
others: (i) increasingly stringent environmental regulations which have resulted
in an increased need for substantial capital to maintain regulatory compliance;
(ii) the inability of many smaller operators to achieve the economies of scale
necessary to compete with larger providers; (iii) the competitive and economic
benefits of providing integrated collection, recycling, transfer and disposal
services; and (iv) the privatization of solid waste assets and services by
municipalities. Although significant consolidation has occurred within the solid
waste management industry, the Company believes the industry remains highly
fragmented and that a substantial number of potential acquisition opportunities
remain, including within the Northeast and Mid-Atlantic regions where it
operates.
Stringent environmental regulations have resulted in rising costs for
owners of landfills while permits required for landfill development, expansion
or construction have also become increasingly difficult to obtain. These ongoing
costs are coupled with increased financial reserve requirements for closure and
post-closure monitoring. Certain of the smaller industry participants have found
these costs and regulations burdensome and have decided either to close their
operations or to sell them to larger operators. As a result, the number of
operating landfills has decreased while the size of landfills has increased.
Economies of scale, driven by the high fixed costs of landfill assets
and the associated profitability of each incremental ton of waste, have led to
the development of higher volume, regional landfills. Integrated operators
achieve economies of scale in the solid waste collection and disposal industry
through vertical integration of their operations that may generate a significant
waste stream for these high-volume landfills. Integrated companies gain further
competitive advantage over non-integrated operators by being able to control the
waste stream. The ability of larger integrated companies to internalize the
collected solid waste (i.e., collecting the waste at the source, transferring it
through their own transfer stations and disposing of it at their own disposal
facility), coupled with access to significant capital resources to make
acquisitions, has created an environment in which large integrated companies can
operate more cost effectively and competitively than non-integrated operators.
The trend toward consolidation in the solid waste industry is further
supported by the increasing tendency of a number of municipalities to privatize
their waste disposal operations. Privatization is often an attractive
alternative for municipalities due, among other reasons, to the ability of
integrated operators to leverage their economies of scale to provide the
community with a broader range of services while enabling the municipality to
reduce its own capital asset requirements. The Company believes that the
financial condition of municipal landfills was adversely affected by the 1994
United States Supreme Court decision, which declared "flow control" laws,
particularly in the Northeastern states, unconstitutional. These laws had
required waste generated in counties or districts to be disposed of at the
respective county or district-owned landfills or incinerators. The reduction in
the captive waste stream to these facilities, resulting from the invalidation of
such laws, forced the counties that owned them to increase their per ton tipping
fees to meet municipal bond payments. The Company believes that these market
dynamics are factors causing municipalities throughout the Northeastern states
to consider the privatization of public facilities.
Strategy
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. The
Company intends to implement this strategy as follows:
Expansion through 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
Baltimore, Maryland/Washington D.C. region. During 1998, the Company completed
34 acquisitions within its five current operating regions. The Company intends
to continue to expand by acquiring solid waste disposal capacity and collection
companies in new and existing markets. In considering new markets, the Company
evaluates opportunities to acquire or otherwise control sufficient landfill
capacity, transfer stations and collection operations which would enable it to
generate an integrated waste stream and achieve the disposal economies of scale
necessary to meet its market share and financial objectives. The Company has
established criteria, which enable it to evaluate the prospective acquisition
opportunity and the target market. Historically, the Company has entered new
markets, which are adjacent to its existing markets; however, the Company may
consider new markets in non-contiguous geographic areas, which meet its
criteria.
Internal Growth. In order to generate continued internal growth, the
Company has focused on increasing sales penetration in its current and adjacent
markets, soliciting new commercial, industrial and residential customers,
marketing upgraded services to existing customers and, where appropriate,
raising prices. As customers are added in existing markets, the Company's
revenue per routed truck is improved, which generally increases the Company's
collection efficiencies and profitability. The Company uses transfer stations,
which serve to link disparate collection operations with Company landfills, as
an important part of its internal growth strategy.
Operating Enhancements for Acquired and Existing Businesses. The Company
has implemented a system that establishes standards for each of its markets and
tracks operating criteria for its collection, transfer, disposal and other
services to facilitate improved profitability in existing and acquired
operations. These measurement criteria include collection and disposal routing
efficiency, equipment utilization, cost controls, commercial weight tracking and
employee training and safety procedures. The Company believes that by
establishing standards and closely monitoring compliance, it is able to improve
existing and acquired operations. Moreover, where the Company is able to
internalize the waste stream of acquired operations, it is further able to
increase operating efficiencies and improve capacity utilization.
Acquisition Program
The Company is pursuing 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 seeks acquisitions that are
consistent with its three-step acquisition program 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.
The following table sets forth acquisitions completed by the Company
through March 24, 2000:
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Acquisition Month Acquired Principal Business Location
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Central Pennsylvania Region
B&J Garbage Service July 1999 Collection Berlin, PA
Pro-Disposal April 1999 Collection Bellwood, PA
Cumberland Waste Service, Inc. March 1999 Collection Cumberland, PA
Cumberland March 1999 Landfill Cumberland, PA
Koontz Disposal January 1999 Collection Boswell, PA
Jim's Hauling, Inc. January 1999 Collection Duncansville, PA
Mostoller Landfill, Inc. August 1998 Landfill Somerset, PA
Worthy's Refuse Service August 1998 Collection McVey Town, PA
Sandy Run Landfill July 1998 Landfill Hopewell, PA
Patterson's Hauling May 1998 Collection Altoona, PA
Pleasant Valley Hauling May 1998 Collection Altoona, PA
McCardle Refuse Company May 1998 Collection Burham, PA
Horvath Sanitation, Inc./
Eagle Recycling, Inc. May 1998 Collection Altoona, PA
Eastern New England Region
C&J Trucking, Inc. and affiliates July 1999 Collection/Transfer Stations Lynn, MA/Londonderry, NH
Troiano Trucking, Inc. March 1999 Collection Worcester, MA
Steve Provost Rubbish Removal December 1998 Collection Rochdale, MA
Sunrise Trucking December 1998 Collection Spencer, MA
Trashworks November 1998 Collection Worcester, MA
Mattei-Flynn Trucking, Inc. August 1998 Collection Auburn, MA
Mass Wood Recycling, Inc. July 1998 Transfer Station Oxford, MA
Upstate New York Region
Palmer Resource Recovery Corp. May 1999 Transfer Station Syracuse, NY
Tri-Valley Sanitation, Inc. April 1999 Collection Whitesboro, NY
Santaro Trucking Co., Inc. January 1999 Collection Syracuse, NY
Richard A. Bristol, Sr. November 1998 Collection Rome, NY
Bristol Trash and Recycling II November 1998 Collection Rome, NY
Shepard Disposal Service October 1998 Collection Oneida, NY
Emmons Trash Removal October 1998 Collection Sherill, NY
Wayne Wehrle September 1998 Collection Clinton, NY
Phillip Trucking September 1998 Collection Wampsville, NY
Mary Lou Mauzy September 1998 Collection Cazenovia, NY
Costello's Trash Removal September 1998 Collection Cazenovia, NY
Bliss Rubbish Removal, Inc. September 1998 Collection Camden, NY
Besig & Sons September 1998 Collection Westmoreland, NY
Larry Baker Disposal, Inc. September 1998 Collection Oneida, NY
Vermont Region
B.B. & B. Trucking April 1999 Collection Burlington, VT
Grady Majors Rubbish Removal September 1998 Collection St. Albans, VT
Cota Sanitation June 1998 Collection Newport, VT
Vincent Moss June 1998 Collection Newport, VT
Austin Rubbish Removal June 1998 Collection Newport, VT
Surprenant Rubbish, Inc. June 1998 Collection Newport, VT
Fortin's Trucking of Williston May 1998 Collection Williston, VT
John Leo & Sons, Ltd. March 1998 Collection Burlington, VT
Rapid Rubbish Removal, Inc. February 1998 Collection/Transfer Station St. Johnsbury, VT
Greenia Trucking February 1998 Collection St. Albans, VT
Doyle Disposal January 1998 Collection Barre, VT
Perkins Disposal January 1998 Collection St. Johnsbury, VT
CSWD Transfer Station* October 1997 Transfer Station Williston, VT
The Hartigan Company January 1997 Collection Stowe, VT
Waitsfield Transfer Station November 1995 Transfer Station Waitsfield, VT
Moretown Landfill July 1995 Landfill Moretown, VT
Baltimore, Maryland/Washington, D.C. Region
Eastern TransWaste of July 1999 Collection/Transfer Station Capitol Heights, MD/
Maryland, Inc. Washington, DC
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Integrated Solid Waste Management Operations
The Company's operations include the ownership and/or operation of
landfills, solid waste collection services and transfer stations. Revenue is
attributed fully 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. As the Company has
executed its acquisition strategy and integrated the solid waste management
assets acquired, the Company's rate of internalization of its operations has
increased. Throughout 1999, the Company increased the amount of solid waste
collected by the Company that was subsequently disposed at Company landfills and
increased the amount of the solid waste delivered for disposal at the Company's
landfills that was collected by the Company.
Solid Waste Collection. The Company's solid waste collection operations
served approximately 73,000 commercial, industrial, residential and municipal
customers at December 31, 1999. The Company's commercial and industrial
collection services are performed on a recurring basis or under service
agreements with terms ranging from one to three years, and fees are determined
by such factors as collection frequency, type of equipment and containers
furnished, the type, volume and weight of the solid waste collected, the
distance to the disposal or processing facility and the cost of disposal or
processing. The Company's residential collection and disposal services are
performed either on a subscription basis (i.e., with no underlying contract)
with individuals, or under contracts with municipalities, homeowners
associations, apartment owners or mobile home park operators. Revenues from
collection operations accounted for approximately 73.7% and 73.5% of the
Company's revenues for the years ended December 31, 1999 and 1998, respectively.
Transfer Station Services. At December 31, 1999, the Company owned and
operated five transfer stations. In addition, the Company currently has two
other transfer stations, Oxford, MA and Cicero, NY, under construction. The
transfer stations receive, compact and transfer solid waste collected from the
Company's various collection operations and from third parties to long-haul
vehicles for transport to landfills. The Company believes that transfer stations
benefit the Company by (i) increasing the size of the "shed" which has access to
the Company's landfills and (ii) reducing costs by improving utilization of
collection personnel and equipment. Revenues from transfer station services
accounted for approximately 12.3% and 6.4% of the Company's revenues for the
years ended December 31, 1999 and 1998, respectively.
Landfills. At December 31, 1999, the Company owned four landfills and
has an agreement to operate one landfill under a long-term operating agreement.
The Mostoller, Moretown, Cumberland, and Sandy Run landfills, include leachate
collection systems, groundwater monitoring systems and active methane gas
extraction and recovery systems. Once the permitted capacity of a particular
landfill is reached, the landfill must be closed and capped if additional
capacity is not authorized. The Company establishes reserves for the estimated
costs associated with such closure and post-closure costs over the currently
permitted capacity of such landfill. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Certain Factors Affecting
Future Operating Results - Adequacy of Accruals for Closure and Post-Closure
Costs." Revenues from landfills accounted for approximately 14.0% and 20.1% of
the Company's revenues for the years ended December 31, 1999 and 1998,
respectively.
Internalization of Waste
Throughout 1999, 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 year ended December 31, 1999, nearly
100% of the waste from the Company's Vermont operations was delivered for
disposal at the Moretown Landfill, Inc. and approximately 36% of the waste
delivered for disposal at the Moretown Landfill during this period was collected
by the Company. In addition, approximately 65% of the waste from the Company's
Central Pennsylvania - Altoona division operations was delivered for disposal at
the Sandy Run Landfill and approximately 70% of the waste delivered for disposal
at the Sandy Run Landfill during this period was collected by the Company. Since
the acquisition of Community Refuse, Inc., on March 1, 1999, approximately 95%
of the waste from the Company's Central Pennsylvania - Harrisburg division
operations was delivered for disposal at the Community Refuse, Inc. landfill and
approximately 28% of the waste delivered for disposal at the Community Refuse,
Inc. landfill during this period was collected by the Harrisburg division and
other company regions. Since their acquisition in July 1999, Eastern Trans-Waste
of Maryland, Inc. disposed of approximately 56% of its waste at the Community
Refuse Services, Inc. landfill, while C&J Trucking Company, Inc. disposed of
approximately 14% of its waste at the Community Refuse Services, Inc. landfill.
It is management's intention to fully internalize these operations with WSI
owned landfills during 2000, including the Mostoller Landfill, which opened on
December 28, 1999.
Regional Operations
The Company's current or planned solid waste management operations are
as follows:
Central Pennsylvania Operations.
Altoona. In May 1998, the Company commenced operations in Central
Pennsylvania, through the acquisition of Horvath Sanitation, Inc. and Eagle
Recycling, Inc., which were based in Altoona, Pennsylvania. Subsequently, the
Company completed several tuck-in acquisitions. The Altoona operations serve
residential, commercial, industrial and municipal customers. In July 1998, the
Company acquired the Sandy Run Landfill, a 700-acre, 3.0 million cubic yard
permitted solid waste landfill in Hopewell, Pennsylvania. The Sandy Run Landfill
is currently permitted to receive approximately 86,000 tons per year and had
remaining estimated permitted capacity at December 31, 1999 of approximately 2.8
million cubic yards. Approximately 65% of the waste from the Company's Central
Pennsylvania - Altoona division operations was delivered for disposal at the
Sandy Run Landfill and approximately 70% of the waste delivered for disposal at
the Sandy Run Landfill during this period was collected by the Company.
Harrisburg. On March 11, 1999, the Company acquired the Community
Refuse Services, Inc. landfill, located in Shippensberg, Pennsylvania, and
Cumberland Waste Service, Inc., a collection operation. The landfill acquisition
added approximately 6.0 million cubic yards of capacity for the region and is
permitted to accept 309,000 tons of municipal solid waste per year. Since the
acquisition of Community Refuse, Inc, approximately 95% of the waste from the
Company's Central Pennsylvania - Harrisburg division operations was delivered
for disposal at the Community Refuse, Inc. landfill and approximately 28% of the
waste delivered for disposal at the Community Refuse, Inc. landfill during this
period was collected by the Company.
Somerset. On December 28, 1999, the Company opened the Mostoller
landfill in Somerset County, Pennsylvania. This landfill is permitted to accept
2,000 tons per day, six days a week, or 624,000 tons per year, of municipal
solid waste, construction and demolition waste, sludge and residual wastes. This
landfill consists of 7 cells having approximately 14.2 million cubic yards of
total permitted capacity with expected additional room for expansion on the 513
acre permitted "greenfields" site. The opening of this landfill will improve the
Company's internalization rate beginning in the first quarter of 2000.
Eastern New England Operations. In July 1998, the Company acquired
Mattei-Flynn Trucking, Inc. in Auburn, Massachusetts. This waste collection
operation currently has an established customer base comprising of residential,
commercial, industrial and municipal customers and serves as a platform for
company growth in this targeted regional market. The Company completed four
tuck-in acquisitions that have been integrated into the Mattei-Flynn operations.
In 1999, construction commenced on a permitted transfer station in Oxford,
Massachusetts. This transfer station is projected to commence operations during
the summer of 2000. The Company and the Town of South Hadley, Massachusetts have
entered into a contract whereby the Company will operate the Town's 30-acre
municipal solid waste landfill. The Town of South Hadley will retain full
ownership of the South Hadley Landfill while the Company operates the facility,
which has approximately 1.87 million cubic yards of new capacity for future
disposal. The Company is currently in the permitting process for the South
Hadley landfill. The Company anticipates that the landfill will be available to
begin accepting solid waste at the first 10-acre lined cell late in 2000. The
Company intends to integrate its collection operations with the Oxford Transfer
Station and to internalize the waste at the South Hadley Landfill. In addition,
the Company has a long-term disposal agreement with a third party landfill in
Southbridge, Massachusetts at favorable rates through 2019. As a part of the
agreement, the Company has a "Right of First Refusal" to purchase the landfill.
On July 1, 1999, the Company acquired the assets of C&J Trucking, Inc.
and certain affiliated entities, which included a well-established commercial
and industrial collection operation, as well as two transfer stations - one
located in Londonderry, New Hampshire and one located in Lynn, Massachusetts. On
a combined basis, the two transfer stations accept in excess of 1,000 tons of
solid waste per day. In the fourth quarter of 1999, the Company began disposing
of waste collected by this operation at its Community Refuse, Inc landfill in
Central Pennsylvania. During 1999, C&J Trucking Company, Inc. disposed of
approximately 14% of its waste at the Community Refuse, Inc. landfill. During
2000, the Company will begin disposing the waste collected by these primary
operations at its Mostoller landfill in Somerset County Pennsylvania, in
addition to Community Refuse.
Upstate New York Operations. During the four months ended December 31,
1998, the Company entered the Upstate New York market with the acquisition of
eleven collection operations and a transfer station in the general area between
Syracuse and Utica, New York. In January 1999, the Company completed the
acquisition of Santaro Trucking Co., Inc., a collection company located in
Syracuse, New York servicing over 400 commercial customers. These waste
collection operations serve residential, commercial, industrial and municipal
customers. The Company selected the Upstate New York market for collection
operations and transfer stations in anticipation of the privatization of nearby
landfills. The Company is currently evaluating opportunities for expansion and
integration of its Upstate New York operations.
Vermont Operations. The Company established its first integrated solid
waste management operations in the geographical area surrounding its Moretown
Landfill. In addition to the Moretown Landfill, the Company currently owns
and/or operates three transfer stations and collection operations serving
commercial, industrial, residential and municipal customers in the Burlington,
St. Albans, St. Johnsbury, Newport and Barre-Montpelier, Vermont areas. The
Vermont operations serves residential, commercial, industrial and municipal
customers. The Moretown Landfill is permitted to receive approximately 120,000
tons per year. During 1999, nearly 100% of the waste from the Company's Vermont
operations was delivered for disposal at the Moretown Landfill and approximately
36% of the solid waste delivered for disposal at the Moretown Landfill during
this period was collected by the Company.
Baltimore, Maryland/Washington, DC Operations. On July 1, 1999, the
Company acquired Eastern Trans-Waste of Maryland, Inc. ("ETW") a
well-established commercial and industrial collection operation with a 53,000
square foot transfer station located in Washington, DC, which is permitted to
operate twenty-four hours per day with no capacity restrictions. As part of its
customer base, ETW serves the White House and numerous federal agencies.
Beginning in the third quarter of 1999, the Company began disposing of the waste
collected by this operation at its Community Refuse, Inc. landfill in
Cumberland, Pennsylvania. Approximately 56% of the waste collected by the
Baltimore, Maryland/Washington, DC division was internalized during the second
half of 1999.
Competition
Though the solid waste management industry has been substantially
consolidated in certain markets, it generally is highly competitive and very
fragmented and requires substantial labor and capital resources. Competition
exists for collection, recycling, transfer and disposal services. The markets in
which the Company competes or is likely to compete in are usually served by one
or more of the large national, regional or local solid waste companies, that may
have greater financial, marketing or technical resources than the Company and
may be able to achieve greater economies of scale than the Company. The Company
also competes with counties, municipalities and operators of alternative
disposal facilities that operate their own waste collection and disposal
facilities. The availability of user fees, charges or tax revenues and the
availability of tax-exempt financing may provide a competitive advantage to the
public sector. Additionally, alternative disposal facilities such as recycling
and incineration may reduce the demand for the disposal of solid waste in
landfills.
The Company competes for waste collection and disposal business on the
basis of quality of service, geographical location and price. From time to time,
competitors may reduce the price of their services in an effort to expand or
maintain market share or to win competitively bid contracts. Competition also
exists within the industry for acquisition targets where the Company may compete
with publicly owned national or regional solid waste management companies.
Marketing and Sales
The Company has a coordinated sales and marketing strategy to obtain
solid waste streams which is formulated at the corporate level and implemented
through regional management. The Company markets its services locally through
regional managers and direct sales representatives who focus on commercial,
industrial, municipal and residential customers. The Company markets its
commercial, industrial and municipal services through its sales representatives
who visit customers on a regular basis and make sales calls to potential new
customers. These sales representatives receive a significant portion of their
compensation based upon meeting certain incentive targets. The Company also
obtains new customers from referral sources, its general reputation, responding
to federal, state and local government bid offerings and local market print
advertising. Leads are also developed from new building permits, business
licenses and other public records. Additionally, each regional operation
generally advertises in the yellow pages and other local business print media
that cover its service area. The Company emphasizes customer satisfaction and
retention, and believes that its focus on quality service will retain existing
and attract additional customers.
Maintenance of a local presence and identity is an important aspect of
the Company's marketing plan, and many of the Company's managers are involved in
local governmental, civic and business organizations. The Company's name and
logo, or, where appropriate, that of the Company's regional operations, are
displayed on all Company containers and trucks. Additionally, the Company
attends and makes presentations at municipal and state conferences and
advertises in governmental associations' membership publications.
No single customer of the Company individually accounted for more than 10%
of Company revenues in the year ended December 31, 1999.
Government Regulation
The Company and its customers are subject to extensive and evolving
environmental laws and regulations that have been enacted in response to
increased concern over environmental issues and technological advances. These
regulations are administered by the U.S. Environmental Protection Agency ("EPA")
and various other federal, state and local environmental, transportation and
health and safety agencies. The Company believes that such laws and regulations
have the effect of enhancing the potential market in which the Company operates
by allowing the Company to offer economical solutions for regulatory problems to
its customers and acquisition candidates. On the other hand, such laws and
regulations represent a potential constraint on, and added expense with respect
to, the Company's operation of projects for its customers or for its own
account.
In order to develop and operate a landfill project, the Company must go
through several governmental review processes and obtain one or more permits and
often zoning or other land use approvals. These permits and zoning or land use
approvals are difficult and time consuming to obtain and may be opposed by
various local authorities, abutters, and ad hoc citizens' groups. In connection
with the Company's preliminary development of landfill projects, the Company
will expend considerable time, effort and resources in complying with the
governmental review and permitting process necessary to develop or increase the
capacity of these landfills. Once obtained, operating permits generally must be
periodically renewed and are subject to modification and revocation by the
issuing agency. Furthermore, landfill operations are subject to challenge under
statutory and common law regulation of "nuisances," in addition to statutes and
regulations with respect to permits and other approvals. Similar permits and
approvals are required for the development and operation of transfer stations,
although the regulatory reviews of applications pertaining to transfer stations
are generally less costly and time-consuming than the procedures conducted with
respect to the permitting of landfills.
The Company's landfill operations and transfer stations subject it to
certain laws and regulations governing operational, monitoring, site
maintenance, closure and post-closure, and financial assurance obligations which
change from time to time and which could give rise to increased capital
expenditures and operating costs. In connection with the Company's operation of
landfills and transfer stations, the Company will expend considerable time,
effort and resources in complying with these laws and regulations. Governmental
authorities have the power to enforce compliance with these laws and regulations
and to obtain injunctions or impose civil or criminal penalties in the case of
violations. Failure to correct the problems to the satisfaction of the
authorities could lead to curtailed operations, additional costs or even closure
of a landfill or transfer station.
The principal federal, state, and local statutes and regulations
applicable to the Company's operations are as follows:
The Resource Conservation and Recovery Act of 1976 ("RCRA"). RCRA
regulates the generation, treatment, storage, handling, transportation and
disposal of solid waste and requires states to develop programs to ensure the
safe disposal of solid waste. RCRA divides solid waste into two groups,
hazardous and non-hazardous. Wastes are generally classified as hazardous wastes
if they (i) either (a) are specifically included on a list of hazardous wastes
or (b) exhibit certain hazardous characteristics and (ii) are not specifically
designated as non-hazardous. Wastes classified as hazardous under RCRA are
subject to much stricter regulation than wastes classified as non-hazardous, and
businesses that deal with hazardous waste are subject to regulatory obligations
in addition to those imposed on handlers of non-hazardous waste.
Among the wastes that are specifically designated as non-hazardous waste
are household waste and "special" waste, including items such as petroleum
contaminated soils, asbestos, shredder fluff and most non-hazardous industrial
waste products.
The EPA regulations issued under Subtitle C of RCRA (the "Subtitle C
Regulations") impose a comprehensive "cradle to grave" system for tracking the
generation, transportation, treatment, storage and disposal of hazardous wastes.
The Subtitle C Regulations impose obligations on generators, transporters and
disposers of hazardous waste, and require permits that are costly to obtain and
maintain for sites where such material is treated, stored or disposed. Subtitle
C requirements include detailed operating, inspection, training and emergency
preparedness and response standards, as well as requirements for manifesting,
record keeping and reporting, corrective action, facility closure, post-closure
and financial responsibility. Most states have promulgated regulations modeled
on some or all of the Subtitle C provisions issued by the EPA. Some state
regulations impose different, additional or more stringent obligations.
The Company is not involved with transportation or disposal of hazardous
wastes, except for the occasional collection, at certain transfer stations, of
hazardous wastes generated by "conditionally exempt small quantity generators"
(as defined by RCRA). These hazardous wastes are then transported by properly
permitted hazardous waste transporters for disposal at properly permitted
hazardous waste disposal facilities that are owned by third parties.
In October 1991, the EPA adopted new regulations pursuant to Subtitle D
of RCRA (the "Subtitle D Regulations"). These new regulations became generally
effective in October 1993 (except for certain municipal solid waste landfills
accepting less than 100 TPD, as to which the effective date was April 9, 1994,
and new financial assurance requirements, which became effective April 9, 1997)
and include location restrictions, facility design standards, operating
criteria, closure and post-closure requirements, financial assurance
requirements, groundwater monitoring requirements, groundwater remediation
standards and corrective action requirements. In addition, these regulations
require that new landfills meet more stringent liner design criteria (typically,
composite soil and synthetic liners or two or more synthetic liners) designed to
keep leachate out of groundwater and have extensive collection systems to
control leachate for treatment prior to disposal. Groundwater wells must also be
installed at virtually all landfills to monitor groundwater quality. The
regulations also require, where threshold test levels are present, that methane
gas generated at landfills be controlled in a manner that protects human health
and the environment. Each state is required to revise its landfill regulations
to meet these requirements or the EPA will automatically impose such
requirements upon it. Each state is also required to adopt and implement a
permit program or other appropriate system to ensure that landfills within the
state comply with the Subtitle D criteria. Many states, including Massachusetts,
have adopted regulations or programs more stringent than the Subtitle D
Regulations.
The Federal Water Pollution Control Act of 1972 (the "Clean Water Act").
The Clean Water Act establishes rules regulating the discharge of pollutants
from a variety of sources, including solid waste disposal sites, into waters of
the United States. If runoff or collected leachate from the Company's landfills
and transfer stations are discharged into streams, rivers or other surface
waters of the United States, the Clean Water Act would require the Company to
apply for and obtain a discharge permit, conduct sampling and monitoring and,
under certain circumstances, reduce the quantity of pollutants in such
discharge. Also, virtually all landfills are required to comply with federal
storm water regulations, which are designed to prevent possibly contaminated
storm water from flowing into surface waters. The Company is working with the
appropriate regulatory agencies to ensure that its facilities are in compliance
with Clean Water Act requirements, particularly as they apply to treatment and
discharge of leachate and storm water. The Company has secured or has applied
for the required discharge permits under the Clean Water Act or comparable
state-delegated programs. To ensure compliance with the Clean Water Act
pretreatment and discharge requirements, the Company has either installed
wastewater treatment systems at its facilities to treat its effluent to
acceptable levels before discharge or has arranged to discharge its effluent to
municipal wastewater treatment facilities.
The Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("Superfund" or "CERCLA"). CERCLA establishes a regulatory and
remedial program intended to provide for the investigation and cleanup of
facilities from which there has been, or is threatened, a release of any
hazardous substance into the environment. CERCLA's primary mechanism for
remedying such problems is to impose strict joint and several liability for
cleanup of facilities on current owners and operators of the site, former owners
and operators of the site at the time of the disposal of the hazardous
substances, as well as the generators of the hazardous substances and the
transporters who arranged for disposal or transportation of the hazardous
substances. The costs of CERCLA investigation and cleanup can be very
substantial. Liability under CERCLA does not depend solely upon the existence or
disposal of "hazardous waste" but can also be based upon the existence of even
very small amounts of the numerous "hazardous substances" listed by the EPA,
many of which can be found in household waste. If, for example, the Company were
to be found to be a responsible party for a CERCLA cleanup at one of the
Company's owned or operated facilities, the enforcing agency could hold the
Company completely responsible for all investigative and remedial costs even if
others may also be liable. CERCLA also authorizes the imposition of a lien in
favor of the United States upon all real property subject to or affected by a
remedial action for all costs for which a party is liable. The Company's ability
to obtain reimbursement from others for their allocable share of such costs
would be limited by the Company's ability to find other responsible parties and
prove the extent of their responsibility and by the financial resources of such
other parties. In the past, legislation has been introduced in Congress to limit
the liability of municipalities and others under CERCLA as generators and
transporters of municipal solid waste. Although such legislation has not been
enacted, if it were to pass it would limit the Company's ability to seek full
contribution from municipalities for CERCLA cleanup costs even if the hazardous
substances that were released and caused the need for cleanup at one of the
Company's facilities were generated by or transported to the facility by a
municipality.
The Clean Air Act. The Clean Air Act provides for regulation, through
state implementation of federal requirements, of the emission of air pollutants
from certain landfills based upon the date of the landfill construction and
volume per year of emissions of regulated pollutants. The EPA has recently
promulgated new source performance standards regulating air emissions of certain
regulated pollutants (methane and non-methane organic compounds) from solid
waste landfills. The EPA may also issue regulations controlling the emissions of
particular regulated air pollutants from solid waste landfills. Landfills
located in areas with air pollution problems may be subject to even more
extensive air pollution controls and emission limitations. In addition, the EPA
has issued standards regulating the removal, handling and disposal of
asbestos-containing materials.
Each of the federal statutes described above contains provisions
authorizing, under certain circumstances, the bringing of lawsuits by private
citizens to enforce the requirements of the statutes.
The Hazardous Materials Transportation Act. The transportation of
hazardous waste is regulated both by the EPA pursuant to RCRA and by the federal
Department of Transportation ("DOT") pursuant to the Hazardous Materials
Transportation Act ("HMTA"). Pursuant to the HMTA, DOT has enacted regulations
governing the transport of hazardous waste. These regulations govern, among
other things, packaging of the hazardous waste during transport, labeling and
marking requirements, and reporting of and response to spills of hazardous waste
during transport. In addition, under both the HMTA and RCRA, transporters of
hazardous waste must comply with manifest and record keeping requirements, which
are designed to ensure that a shipment of hazardous waste is properly identified
and can be tracked from its point of generation to point of disposal at a
permitted hazardous waste treatment, storage or disposal facility.
The Occupational Safety and Health Act of 1970 ("OSHA"). OSHA authorizes
the Occupational Safety and Health Administration to promulgate occupational
safety and health standards. Various of those promulgated standards, including
standards for notices of hazards, safety in all aspects of the workplace, and
specific standards relating to excavation, and the handling of asbestos, may
apply to certain of the Company's operations. OSHA regulations set forth
requirements for the training of employees handling, or who may be exposed in
the workplace to, concentrations of asbestos-containing materials that exceed
specified action levels. The OSHA regulations also set standards for employee
protection, including medical surveillance, the use of respirators, protective
clothing and decontamination units, during asbestos demolition, removal or
encapsulation as well as its storage, transportation and disposal. In addition,
OSHA specifies a maximum permissible exposure level for airborne asbestos in the
workplace. Apart from receiving asbestos waste at the Company's landfills and
transfer stations, the Company has no direct involvement in asbestos removal or
abatement projects.
State and Local Regulation. Each state in which the Company now operates
or may operate in the future has laws and regulations governing the generation,
storage, treatment, handling, transportation and disposal of solid and hazardous
waste, water and air pollution and, in most cases, the siting, design,
operation, maintenance, closure and post-closure maintenance of landfills and
transfer stations. Certain state laws also contain provisions authorizing, under
certain circumstances, the bringing of lawsuits by private citizens to enforce
the requirements of those laws. In addition, many states have adopted
"Superfund" statutes comparable to, and in some cases more stringent than,
CERCLA. These statutes impose requirements for investigation and cleanup of
contaminated sites and liability for costs and damages associated with such
sites, and some provide for the imposition of liens on property owned by
responsible parties. Furthermore, many municipalities also have ordinances,
local laws and regulations affecting Company operations. These include zoning
and health measures that limit solid waste management activities to specified
sites or activities, flow control provisions that direct the delivery of solid
wastes to specific facilities, laws that grant the right to establish franchises
for collection services and then put out for bid for the right to provide
collection services, and bans or other restrictions on the movement of solid
wastes into a municipality.
Certain permits and approvals may limit the types of waste that may be
accepted at a landfill or the quantity of waste that may be accepted at a
landfill during a given time period. In addition, certain permits and approvals,
as well as certain state and local regulations, may limit a landfill to
accepting waste that originates from specified geographic areas or seek to
restrict the importation of out-of-state waste or otherwise discriminate against
out-of-state waste. Generally, restrictions on the importation of out-of-state
waste have not withstood judicial challenge. However, proposed federal
legislation would allow individual states to prohibit the disposal of
out-of-state waste or to limit the amount of out-of-state waste that could be
imported for disposal and would require states, under certain circumstances, to
reduce the amounts of waste exported to other states. If this or similar
legislation is enacted, states in which the Company operates landfills could act
to limit or prohibit the importation of out-of-state waste. Such state actions
could adversely affect landfills within those states that receive a significant
portion of waste originating from out-of-state.
In addition, certain states and localities may for economic or other
reasons restrict the exportation of waste from their jurisdiction or require
that a specified amount of waste be disposed of at facilities within their
jurisdiction. In 1994, the United States Supreme Court held unconstitutional,
and therefore invalid, a local ordinance that sought to impose flow controls on
taking waste out of the locality. However, certain state and local jurisdictions
continue to seek to enforce such restrictions and, in certain cases, the Company
may elect not to challenge such restrictions based upon various considerations.
In addition, the aforementioned proposed federal legislation would allow states
and localities to impose certain flow control restrictions. These restrictions
could result in the volume of waste going to landfills being reduced in certain
areas, which may adversely affect the Company's ability to operate its landfills
at their full capacity and/or affect the prices that can be charged for landfill
disposal services.
There has been an increasing trend at the federal, state and local level
to mandate and encourage waste reduction at the source and waste recycling and
to prohibit the disposal of certain types of solid wastes, such as yard wastes,
in landfills. The enactment of regulations reducing the volume and types of
wastes available for transport to and disposal in landfills could affect the
Company's ability to operate its facilities at their full capacity.
The Company believes that it is in material compliance with federal,
state and local regulations based on the Company's internal review process,
which has not identified any material non-compliance, and the Company has not
received any verbal or written notification from any governmental agency to the
contrary. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Certain Factors Affecting Future Operating Results
- -Potential Environmental Liability and Adverse Effect of Environmental
Regulation."
Employees
As of December 31, 1999, the Company had 520 full time employees. The
Company believes its future success will depend in part on its continued ability
to recruit and retain highly qualified technical and managerial personnel. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors Affecting Future Operating Results -Dependence on
Management" and "- Ability to Manage Growth." The Company's employees are not
subject to any collective bargaining agreement. The Company considers its
relations with its employees to be good.
Item 2. Properties
The Company owns or leases and operates landfills, transfer stations,
offices and other facilities in connection with its integrated solid waste
management operations as described under "Business-Integrated Solid Waste
Management Operations." In addition, the Company leases its corporate
headquarters, located at 420 Bedford Street, Suite 300, Lexington,
Massachusetts. The Company currently occupies approximately 11,000 square feet
at the Lexington location under the terms of a lease expiring in March 2003,
with annual rent of approximately $200,000 subject to escalation in future
years.
<PAGE>
The following table provides certain information regarding the 5 landfills owned
or operated by the Company as of December 31,
1999.
Total Currently Remaining
Site Permitted Permitted
Landfill Name Location Acreage Acreage Capacity (cu yds)
- ------------- -------- ------- -------- -----------------
Mostoller Somerset, PA 715 278.1 14,200,000
Sandy Run Hopewell, PA 711 39.6 2,615,000
Moretown Moretown, VT 200 33.7 1,007,000
Cumberland Cumberland, PA 627 104.7 4,824,000
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.
Item 3. 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 4. Submission of Matters to a Vote of Security Holders
Series C Preferred Stock. As part of the agreement to acquire the
assets of Eastern Trans-Waste, Inc. of Maryland and certain affiliated entities,
completed in July 1999, the Company created and issued 1,000 shares of Series C
Convertible Preferred Stock. Each share was issued at $11,615 for total proceeds
of $11,615,000. On October 21, 1999, a special shareholders meeting was held and
the conversion of the Series C Preferred Stock was approved. As a result, the
1,000 shares of Series C Preferred Stock were fully converted into 1,763,000
shares of common stock. The detail of the vote was as follows:
For Against Abstain No Vote Total
9,987,329 46,290 8,000 - 10,041,619
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is currently quoted on the NASDAQ National Market
under the symbol "WSII". The following table sets forth the high and low closing
price of the common stock for the periods indicated and restated to reflect a
one-for five reverse stock split effective February 13, 1998.
High Low
Fourth quarter ended December 31, 1999 $ 5.88 $ 2.63
Third quarter ended September 30, 1999 7.50 5.41
Second quarter ended June 30, 1999 8.38 3.69
First quarter ended March 31, 1999 6.00 4.00
Fourth quarter ended December 31, 1998 $ 6.25 $ 4.38
Third quarter ended September 30, 1998 9.69 5.00
Second quarter ended June 30, 1998 9.81 5.94
First quarter ended March 31, 1998 7.38 3.00
On March 24, 2000, the reported last sale price of the common stock on the
NASDAQ National Market was $3.0625 per share, and there were approximately 1,100
holders of record of common stock.
The Company has never paid dividends on its Common Stock and has no present
intention to pay dividends. The Company's intention is to retain future
anticipated earnings to finance the expansion of its business.
On December 28, 1999, the Company announced that it had raised $15,000,000
through a private placement of Series D Convertible Preferred Stock. The
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. 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.
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. The preferred stock is redeemable at any time by
the Company at par plus accrued and unpaid dividends and, subject to any
required stockholder approval, 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.
<PAGE>
Item 6. Selected Consolidated Financial and Operating Data
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except share and per share data)
The following selected consolidated financial data for the five years
ended December 31, 1999 have been derived from the Company's Consolidated
Financial Statements, which have been audited by KPMG LLP. The selected
consolidated financial data presented below should be read in conjunction with
the Company's Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which is included elsewhere in this Form 10-K. During 1999, the
Company acquired a total of 13 companies including, one landfill, 11 solid waste
collection companies and four transfer stations. During 1998, the Company
acquired a total of 34 companies including two landfills, 31 collection
companies (2 of which included a transfer station) and one transfer station. Due
to the significance of the acquired business operations to the Company's
financial performance, 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.
<TABLE>
Fiscal Year Ended December 31
<CAPTION>
1999 1998 1997 1996 1995
-------- ------- -------- -------- --------
<S><C><C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues........................ $ 54,666 $ 21,045 $ 3,458 $ 1,496 $ 1,344
Cost of operations:
Operating expenses............ 37,921 12,400 1,719 921 766
Depreciation and amortization. 11,974 4,501 692 370 72
Acquisition integration costs (1) 2,853 1,864 -- -- --
Write-off of project development costs -- 236 1,495 6,652 --
---- ------- --------- -------- -----
Total cost of operations... 52,748 19,001 3,906 7,943 838
--------- --------- --------- --------- ---------
Gross profit (loss) ....... 1,918 2,044 (448) (6,447) 506
Selling, general and administrative expenses 9,237 4,483 2,138 2,443 3,286
Amortization of prepaid consulting fees -- -- -- 834 501
Restructuring(2)................ -- -- 596 1,741 --
--------- --------- --------- --------- ---------
Loss from operations.......... (7,319) (2,439) (3,182) (11,465) (3,281)
Other income (expense):
Royalty and other income (expense), net (1,259) (134) (516) 817 761
Interest expense and financing costs (14,580) (4,074) (1,355) ( 1,182) (471)
Interest income............... 480 441 172 178 289
Non-cash charge for debt conversion (5,584) -- -- -- --
Write-off of accounts and notes receivable -- -- (568) -- (2,975)
---- ----- --------- ------ ----------
Total other income (expense).. (20,943) (3,767) (2,267) (187) (2,396)
--------- --------- --------- --------- ---------
Loss before income taxes, discontinued
operations and extraordinary item (28,262) (6,206) (5,449) (11,652) (5,677)
Federal and state income tax expense
(benefit)..................... (6) 43 6 (23) (110)
Discontinued operations......... -- -- -- (2,261) (2,303)
Extraordinary item - loss on extinguishment
of debt....................... (224) (247) (134) -- --
--------- -------- -------- --------- ---------
Net loss........................ $(28,480) $ (6,496) $ (5,589) $(13,890) $ (7,870)
Preferred stock dividends (3)... -- 888 -- -- 10
--------- --------- --------- -------- ---------
Net loss available for common
stockholders(3)............ $(28,480) $ (7,384) $ (5,589) $(13,890) $ (7,880)
========= ========== ======== ======== ========
Basic net income (loss) per share from
continuing operations ........ $ (1.81) $ (0.97) $ (1.51) $ (4.10) $ (2.88)
Weighted average number of shares used in
computation of basic net loss per share 15,588,959 7,389,547 3,612,623 2,834,841 1,932,809
EBITDA (4)......................... $ 4,655 $ 2,130 $ (2,469) $ (9,909) $ (2,592)
Adjusted EBITDA (5)................ $ 7,508 $ 4,230 $ (378) $ (1,516) $ (2,592)
Capital expenditures (excluding acquisitions) $ 25,535 $ 9,032 $ 998 $ 6,599 $ 9,749
Cash flow from operating activities $ 9,792 $ 592 $ (4,586) $ (3,912) $ (3,083)
Cash flow from investing activities $(114,915) $ (71,939) $ 706 $ (7,641) $(10,267)
Cash flow from financing activities $ 117,800 $ 68,576 $ 6,579 $ 6,581 $ 18,416
December 31,
1999 1998 1997 1996 1995
-------- ------- ------- ------- --------
Balance Sheet Data:
Cash and cash equivalents.......... $ 12,872 $ 194 $ 2,964 $ 265 $ 5,237
Working capital.................... (8,097) (6,520) 1,532 (4,508) 2,393
Total assets....................... 255,093 96,117 18,560 16,858 23,508
Long-term debt, less current portion 172,716 74,861 7,201 9,450 12,266
Total stockholders' equity (deficit) 46,852 1,739 5,972 (1,849) 3,292
</TABLE>
(1) 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 expensed as the costs are
incurred. While acquisition integration cost activities are
generally completed within one year from the date of acquisition,
new expenses and accruals are booked each quarter as they are
incurred.
(2) Prior to March 27, 1996, the Company had been actively developing
environmental technologies with potential application in a number
of business areas. On March 27, 1996, the Company announced its
intention to take meaningful actions to conserve cash and working
capital, including restructuring the Company's operations to
focus its resources and activities on developing an integrated
solid waste management operation.
(3) In May and July 1998 the Company met the mandatory conversion
trading requirements and elected to convert all of the remaining
shares of the Company's Preferred Stock into shares of the
Company's Common Stock and the Board of Directors declared and
paid cash dividends of approximately $888,000.
(4) 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. Moreover, EBITDA does not necessarily
indicate whether cash flow will be sufficient for such items as
working capital or 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 investors 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. Because all companies and analysts do not
calculate EDITDA in the same fashion, the EBITDA measures
presented by the Company may not be comparable to the similarly
titled measures reported by other companies. Therefore, in
evaluating EBITDA data, 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.
(5) Adjusted EBITDA is EBITDA after adjusting for one-time charges
for write-off of landfill development costs, acquisition
integration costs and restructuring charges.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto. This Annual Report on
Form 10-K contains forward-looking statements concerning among other things, the
Company's expected future revenues, operations and expenditures and estimates of
the potential markets for the Company's services. Such statements made by the
Company fall within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
such forward-looking statements are necessarily only estimates of future results
and the actual results achieved by the Company may differ materially from these
projections due to a number of factors as discussed in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Certain Factors Affecting Future Operating Results" of this Form
10-K.
Introduction
The Company 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 through its acquisition strategy 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. See "Business - Strategy"
During 1999, the Company acquired a total of 13 companies including one
landfill, 11 collection companies (2 of which included a transfer station) and
one transfer station. During 1998, the Company acquired a total of 34 companies
including two landfills, 31 collection companies (2 of which included a transfer
station) and one transfer station. Due to the significance of the acquired
business operations to the Company's financial performance, 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:
Year ended December 31,
1999 1998 1997
Collection 73.7% 73.5% 12.8%
Landfill 14.0 20.1 78.1
Transfer 12.3 6.4 9.1
------ ------- ------
Total Revenue 100.0% 100.0% 100.0%
========= ======== ======
For the purpose of this table, revenue is attributed fully 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 1999 the increased revenue is
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 during the period of time from their
acquisition through December 31, 1999. The decrease in landfill revenue as a
percentage of revenues in 1999 compared to 1998 is due primarily to the
acquisition of collection companies that had been disposing of their waste at
the Company's transfer stations and landfills. These acquired revenues are now
being recorded as collection revenue.
The increase in the Company's collection revenues as a percentage of
total revenues during 1998 compared to 1997 is due primarily to the impact of
the 31 collection companies acquired during 1998. The decrease in landfill and
transfer station revenue as a percentage of revenues in 1998 compared to 1997 is
due primarily to the acquisition of collection companies that had been disposing
of their waste at the Company's transfer stations and landfills. These acquired
revenues are now being recorded as collection revenue.
Recent Business Developments
Medical Waste Licensing Agreement. During 1996, the Company entered
into a licensing and royalty agreement with ScotSafe Limited (ScotSafe), a
Glasgow, Scotland based company, for the exclusive rights to use the Company's
CFA medical waste processing technology throughout Europe. During the fourth
quarter of 1997 the Company terminated its licensing agreements with ScotSafe
because ScotSafe was in default for failure to pay the Company royalties due
under the terms of the agreement. Subsequent to the termination, ScotSafe was
placed into receivership and Eurocare Environmental Services, Ltd. (Eurocare)
purchased its assets in December 1997. In February 2000, the Company and
Eurocare entered an exclusive European license for the Company's patented
medical waste treatment technology. As part of the licensing agreement, the
Company acquired a minority interest in, and the right of first refusal to
acquire Eurocare.
The Company experienced no Year 2000 issues that caused significant
operational problems, delays in the implementation of new information systems,
or failures related to Year 2000 dependencies in the Company's systems and in
the systems of suppliers and financial institutions. The Company assessed the
readiness of its systems for handling the Year 2000 and management determined
that all material systems were compliant by Year 2000 and that the costs
associated with this were not material. The Company incurred only minimal costs
to date associated with the Year 2000 issue.
Convertible Subordinated Notes. 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. The preferred stock is
redeemable at any time by the Company at par plus accrued and unpaid dividends
and, subject to any required stockholder approval, 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. Series D. On December 28, 1999, the Company raised
$15,000,000 through a private placement of convertible preferred stock. 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
mandatorily converted by the Company if the Company's common stock closing price
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.
<PAGE>
The following table sets forth, for the periods indicated, certain data
derived from the Company's Consolidated Statements of Operations, expressed as a
percentage of revenues:
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C> <C> <C>
1999 1998 1997
Revenues 100.0% 100.0% 100.0%
Operating expenses 69.4 58.9 49.7
Depreciation and amortization 21.9 21.4 20.0
Acquisition integration costs 5.2 8.9 -
Write-off of project development costs - 1.1 43.3
------- -------- ---------
Total cost of operations 96.5 90.3 113.0
------- -------- ---------
Gross profit (loss) 3.5 9.7 (13.0)
Selling, general and administrative expenses 16.9 21.3 61.8
Restructuring - - 17.2
------- -------- ---------
Loss from operations (13.4) (11.6) (92.0)
Royalty and other income (expense), net (2.3) (0.6) (14.9)
Interest income 0.9 2.1 5.0
Interest expense and financing costs (26.7) (19.4) (39.2)
Non-cash charge for debt conversion (10.2) - -
Write off of accounts receivable - - (16.4)
------- --------- ----------
Total other income (expense) (38.3) (17.9) (65.5)
Income tax expense - 0.2 0.2
Loss before extraordinary item (51.7) (29.7) (157.7)
Extraordinary item (0.4) (1.2) (3.9)
-------- -------- ---------
Net loss (52.1)% (30.9)% (161.6)%
========= ======== ==========
EBITDA 8.5% 10.1% (71.4)%
========= ======== ==========
Adjusted EBITDA 13.7% 20.9% (10.9%)
========= ======== ===========
</TABLE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues. Revenues for 1999 increased by approximately $33,621,000
million to approximately $54,666,000 million from approximately $21,045,000
million in 1998. The increase of approximately 159.8% was due primarily to the
13 acquisitions completed in 1999. The increased revenue from the acquisitions
was partially offset by decreased revenue from the existing operations in
Upstate New York due to a decreased customer base.
Cost of operations. Operating expenses for 1999 was approximately
$37,921,000 compared to $12,400,000 in 1998. The increase of approximately
$25,521,000 was primarily due to the acquisitions indicated above. Operating
costs, disposal costs and collection fees vary widely throughout the geographic
areas in which the Company operates. The prices that the Company charges are
determined locally and typically vary by the volume or weight, type of waste
collected, frequency of collections, distance to final disposal sites, labor
costs and amount and type of equipment furnished to the customer. The increase
in operating expenses as a percentage of revenues was primarily due to the
change in revenue mix, with increased revenue coming from collection and
transfer operations, which typically experience much higher operating expenses
than landfill operations. The Company internalizes a significant portion of its
waste collected in Vermont and Central Pennsylvania, which significantly reduces
costs of operations as a percentage of revenue. The Company has begun
internalizing waste from the Eastern New England and Baltimore, MD/Washington DC
Regions. With the opening of the Mostoller landfill on December 28, 1999, the
Company expects to increase the percentage of waste it internalizes in these
regions, which will further reduce its disposal cost as a percentage of revenue.
Depreciation and amortization. Depreciation and amortization expense was
$11,974,000 and $4,501,000 for the years-ended 1999 and 1998, respectively. The
increase of approximately $7,473,000 or 166.0% was due primarily to the 13
acquisitions that took place in 1999 and the full year impact of 1998
acquisitions.
Acquisition integration costs. 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 cost activities are generally completed within one year from the
date of acquisition, new expenses and accruals are booked each quarter as they
are incurred. Acquisition integration costs totaled approximately $2,853,000 and
$1,864,000 for 1999 and 1998, respectively.
Selling, general and administrative expenses. 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 expenses for 1999 increased
approximately $4,755,000 to $9,237,000 from $4,482,000 in 1998. As a percentage
of revenues, selling, general and administrative expenses decreased to 16.9% in
1999 from 21.3% in 1998. The dollar increase was due to acquisitions as well as
ongoing efforts by the Company to build an infrastructure to sustain its
significant growth through acquisition and to support 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, as the
Company is able to purchase "tuck-in" acquisitions that increase revenues and
improve margins without adding significant administrative costs. The Company
anticipates that in future periods its selling, general and administrative
expenses should continue to decrease as a percentage of revenue as it leverages
its current corporate overhead to revenue growth primarily through acquisitions.
Royalty and other expense. Royalty and other expense was approximately
$1,259,000 and $134,000 in 1999 and 1998, respectively. Royalty and other
expenses relate to the Company's medical waste treatment proprietary
technologies.
Interest expense and financing costs. Interest expense for 1999 was
approximately $14,100,000 net of interest income of $480,000 as compared to
approximately $3,633,000 net of interest income of $441,000 for 1998. The
increase resulted primarily from additional indebtedness incurred in connection
with acquisitions and capital expenditures for the Company's operations. During
1999 and 1998, the Company capitalized interest expense of $1,516,000 and
$360,000, respectively related to construction costs.
Non-cash charge for debt conversion. Non-cash charge for debt conversion
relates to the conversion of debt into equity. 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 was converted in
accordance with its original terms. The Company recorded a non-cash charge of
approximately $5,584,000 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.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues. Revenues for 1998 increased by $17,587,000 or 509% to
$21,045,000 from $3,458,000 in 1997. Thirty-four acquisitions completed by the
Company in 1998 accounted for approximately $15.8 million or 90% of the
increase. The balance of the increase is the result of the internal growth
within the Vermont operations during 1998. The growth in the Vermont operations
was due to the full year's operation of the CSWD Transfer Station, which was
acquired in the fourth quarter of 1997, increased volume and prices at the
Moretown Landfill and internal growth at the Company's collection operations.
Cost of operations. Operating expenses for 1998 was approximately
$12,400,000 compared to $1,719,000 for 1997. The increase of $10,681,000 was
primarily due to the 34 acquisitions completed by the Company in 1998 and the
related increase in revenue. As a percentage of sales, operating expenses
increased to approximately 59% in 1998 from approximately 50% in 1997. This
increase was primarily due to the change in revenue mix, with a much larger
portion of the revenue coming from collection operations, which typically
experience much higher operating expenses than landfill operations. The Company
internalizes a significant portion of its waste collected in Vermont and
Pennsylvania, which significantly reduces costs of operations as a percentage of
revenue. The Company's Upstate New York and Eastern New England operations were
not internalized in 1998. Operating costs, disposal costs, and collection fees
vary widely throughout the geographic areas in which the Company operates. The
prices that the Company charges are determined locally, and typically vary by
the volume or weight, type of waste collected, frequency of collections,
distance to final disposal sites, labor costs and amount and type of equipment
furnished to the customer.
Depreciation and amortization. Depreciation and amortization expense was
$4,501,000 and $692,000 for the years-ended 1998 and 1997, respectively. The
increase of $3,809,000 was primarily due to the additional depreciation and
amortization related to the Company's 34 acquisitions completed during 1998.
During 1998, the Company purchased property and equipment of approximately
$24,298,000 related to the acquisitions. ($7,522,000 of this amount was for
assets under development not placed into service in 1998.) Goodwill and other
intangible assets totaling approximately $35,171,000 were also recorded in
connection with the acquisitions. In addition, the Company purchased
approximately $3,094,000 of property and equipment necessary for its ongoing
operations, including costs to improve efficiencies at several of the acquired
companies. Finally, landfill amortization costs in Vermont increased due to
increased usage of the Moretown landfill in 1998. The Company had costs of
approximately $5,456,000 for construction of Cell 2 at the Moretown landfill and
other development costs related to the Mostoller and South Hadley landfill and
the Transfer Station in Oxford Massachusetts totaling approximately $480,000.
These costs did not impact operating results as they were not placed into
service in 1998.
Acquisition integration costs. 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
cost activities are generally completed within one year from the date of
acquisition, new expenses and accruals are booked each quarter as they are
incurred. Acquisition integration costs totaled $1,864,000 for 1998.
Write-off of landfill development costs. Write-off of landfill
development costs were $236,000 and $1,495,000 for 1998 and 1997, respectively.
The write-off of landfill development costs is related to the termination of the
Company's contract for remodeling and operation of a landfill in Fairhaven,
Massachusetts. See footnote 17 "Fairhaven Massachusetts Operation" in the
financial statements included in Item 8. The 1998 expense of $236,000 represents
the final charges related to the termination of the project. There are no
remaining accruals at December 31, 1998.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $2,344,000 in 1998 to $4,482,000 from
$2,138,000 in 1997. As a percentage of revenue, selling, general and
administrative expenses decreased to 21.3% in 1998 from 61.8% in 1997. The
dollar increase was due to efforts by the Company to build infrastructure, to
sustain its significant growth through acquisition and to support corporate
initiatives designed to implement its strategy. The Company expects spending
growth to continue moderately into 1999 as the Company continues to implement
its growth through acquisition strategy. The decrease as a percentage of revenue
was primarily due to the expanded revenue base and related efficiencies, as the
Company is able to purchase "tuck-in" acquisitions that increase revenues and
improve margins without adding significant administrative costs. The Company
anticipates that in future periods its selling, general and administrative
expenses should continue to decrease as a percentage of revenue as it leverages
its current corporate overhead to revenue growth primarily through acquisitions.
Restructuring. During 1996, the Company announced its intention to
restructure the Company's operations to focus its resources and activities on
developing an integrated solid waste management operation. See footnote 16
"Restructuring" in the financial statements included in Item 8. The
restructuring was completed in 1997. Restructuring charges for 1997 totaled
$596,000 which consisted of costs incurred for employee severance,
non-cancelable lease commitments, professional fees and litigation costs. No
charges were recorded in 1998.
Royalty and other expense. Royalty and other expenses were approximately
$134,000 and $516,000 in 1998 and 1997, respectively. Royalty and other expenses
relate to the Company's medical waste treatment proprietary technologies.
Interest expense and financing costs, net. Interest expense for 1998 was
approximately $3,633,000, net of interest income of $441,000 as compared to
approximately $1,182,000 net of interest income of $172,000 for 1997. The
increase resulted primarily from significant increases in debt necessary to
finance the acquisitions and capital needs of the Company. During 1998 and 1997,
the Company capitalized interest expense of $360,000 and $24,000, respectively
related to construction costs for the Mostoller and South Hadley landfills and
the Transfer Station in Oxford Massachusetts discussed above.
Liquidity and Capital Resources
The Company's business is capital intensive. The Company's capital
requirements, which are substantial, include acquisitions, 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 during 1998 and 1999. The Company intends to use the balance of the
proceeds for general corporate purposes, construction projects and working
capital. 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 $22.6 million of the 7% Convertible
Subordinated Notes and approximately $15.4 million of the 11 1/2% Senior Notes
were exchanged into an aggregate of 38,531 shares of the Company's Series E
Convertible Preferred Stock through an exchange offering.
The Company maintains an acquisitions department that is responsible for
the identification, due diligence, negotiation and closure of acquisitions. The
Company believes that a combination of internally generated funds, additional
debt and equity financing will provide adequate funds to support the Company's
cost structure, acquisition strategy and working capital requirements for the
foreseeable future. The Company intends to continue its strategy to aggressively
pursue and develop an integrated solid waste management company, primarily
through acquisitions. 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.
In connection with its growth strategy, the Company currently is and at
any given time will be involved in potential acquisitions that are in various
stages of exploration and negotiation (ranging from initial discussions to the
execution of letters of intent and the preparation of definitive agreements),
some of which may, if consummated, be material. No assurance can be given,
however, that the Company will be successful in completing further acquisitions
in accordance with its growth strategy, or that such acquisitions, if completed,
will be successful.
During 1999, the Company acquired a total of 13 companies, including,
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
Baltimore, Maryland/Washington D.C region. The acquisitions have all been
recorded using the purchase method of accounting and accordingly, the results of
operations of the acquired companies are included in the consolidated statements
of operations since the respective dates of acquisition. The aggregate cost of
the acquisitions was approximately $124,451,000 consisting of approximately
$84,063,000 in cash, $19,338,000 in common stock, $11,615,000 in Series C
Preferred Stock and $9,435,000 in assumed liabilities. The acquisitions have
combined annual revenues of approximately $42.0 million. The acquisitions have
been accounted for using the purchase method of accounting. The purchase prices
were allocated to the assets and liabilities of the acquired companies based on
their respective fair values at the dates of acquisition as follows: property
and equipment of approximately $110,211,000, intangible assets of $10,721,000
and other assets of $3,519,000. The excess of the purchase price over the fair
value of the net identifiable assets acquired of approximately $8,512,000 has
been recorded as goodwill and is being amortized on a straight-line basis over
forty years. The acquisitions have combined annual revenues of approximately
$42.0 million. Acquisition integration costs for the year ended December 31,
1999, related to the acquisitions in all regions were approximately $2,853,000.
The Company generated net cash from operating activities for 1999
approximately $9,793,000. In 1998, the Company generated net cash of
approximately $592,000 from operating activities. The improved cash flow from
operations in 1999 was due primarily to the increased revenues, which were
offset by related increases in cost of operations, integration costs and
selling, general and administrative expenses. The remainder of the cash flow
increase was due to changes in the operating assets and liabilities including
increases in accounts payable, accrued expenses and deferred revenue. These were
offset by an increase in accounts receivable.
EBITDA increased by approximately $2,525,000 during 1999 to
approximately $4,655,000 from EBITDA of approximately $2,130,000 in 1998. As a
percentage of revenue, EBITDA decreased to 8.5% during 1999 from 10.1% in 1998.
Adjusted EBITDA increased by approximately $3,278,000 during 1999 to
approximately $7,508,000 from Adjusted EBITDA of approximately $4,230,000 in
1998. As a percentage of revenue, Adjusted EBITDA decreased to 13.7% in 1999
compared to 20.9% in 1998. The decrease in EBITDA as a percentage of revenue was
primarily due to the change in revenue mix, with increased revenue coming from
collection and transfer operations, which typically experience much higher
operating expenses than landfill operations.
Net cash used by investing activities during 1999 was approximately
$114,915,000 compared to cash used by investing activities of approximately
$71,939,000 in 1998. Of the net cash used by investing activities in 1999,
approximately $84,063,000 million was used for the acquisition of landfill,
collection and transfer operations in Vermont, Central Pennsylvania, Eastern New
England and Upstate New York. Additional capital expenditures of approximately
$850,000 were made to increase operating efficiencies at the Company's Vermont,
Central Pennsylvania, Eastern New England and Upstate New York operations. Other
investing activity included the acquisition of various long-term permits
necessary to operate the landfills and for long-term prepaid disposal costs. The
net cash used by investing activities for 1998 was primarily due to the
acquisitions of landfill, collection and transfer operations in Vermont, Central
Pennsylvania, Eastern New England and Upstate New York. In addition, the Company
placed deposits for future acquisitions totaling $2,211,000. Additional capital
expenditures of approximately $9,032,000 were made to develop Cell 2 at the
Company's Moretown landfill and to increase operating efficiencies at the
Company's Vermont, Central Pennsylvania, Eastern New England and Upstate New
York operations.
The Company's capital expenditures and capital needs for acquisitions
have increased significantly, reflecting the Company's rapid growth by
acquisition and development of revenue producing assets, and will increase
further as the Company continues to complete acquisitions.
Net cash provided by financing activities during 1999 was approximately
$117,800,000 compared to $68,576,000 in 1998. The increase in 1999 was due
primarily to the receipt of the proceeds of $100,000,000 related to the Senior
Notes and borrowings under the Company's bank credit facility of $17,500,000.
The proceeds were offset by principal repayments of debt of approximately
$23,000,000. The Company also raised approximately $30,000,000 from two private
placements of its Common and Preferred Stock.
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 December 31, 1999, the Company had borrowed $17.5 million against the
credit facility.
At December 31, 1999, the Company had approximately $174.1 million of
short-term and long-term debt.
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-Substantial Increased Leverage," and "Uncertain Ability to
Finance the Company's Growth."
<PAGE>
Certain Factors Affecting Future Operating Results
History of Losses
During the fiscal years ending December 31, 1999, 1998 and 1997, the Company
suffered net losses (including non-recurring charges) of approximately
$28,480,000, $6,496,000, and $5,589,000, respectively, on revenues of
approximately $54,660,000 $21,045,000, and $3,458,000, respectively. Following
its restructuring in 1996 in which the Company directed its focus on becoming an
integrated solid waste management company, the Company implemented a business
strategy based on aggressive growth through acquisitions. The Company's ability
to become profitable, and to maintain such profitability, as it pursues its
business strategy will depend upon several factors, including its ability to (i)
execute its acquisition strategy and expand its revenue generating operations
while not proportionately increasing its administrative overhead, (ii) locate
sufficient additional financing to fund acquisitions, and (iii) continually
adapt to changing conditions in the competitive market in which it operates.
Outside factors, such as the economic and regulatory environments in which it
operates will also have an effect on the Company's business.
Substantial Increased Leverage
In connection with its business strategy, the Company has incurred and expects
to incur substantial indebtedness, resulting in a highly leveraged capital
structure. The Company's substantial indebtedness could have important
consequences, including limiting the Company's ability to fund future working
capital, capital expenditures and other general corporate requirements. This may
increase the Company's vulnerability to adverse economic and industry
conditions; requiring the Company to dedicate a substantial portion of its cash
flow from operations to payments on the Company's indebtedness, thereby reducing
the availability of the Company's cash flow to fund working capital, capital
expenditures and other general corporate purposes; limiting the Company's
flexibility in planning for, or reacting to, changes in the Company's business
and the industry in which the Company operates; placing the Company at a
competitive disadvantage compared to the Company's competitors that have less
indebtedness and limiting the Company's ability to borrow additional funds.
Uncertain Ability to Finance the Company's Growth
The Company will require substantial funds to complete and bring to commercial
viability all of its currently planned projects. The Company also anticipates
that future business acquisitions will require financing through cash from
operations, borrowings under its bank credit facility, offering the Company's
stock as consideration. Therefore, the Company's ability to satisfy its future
capital and operating requirements is dependent on a number of pending or future
financing activities, none of which is assured successful completion.
Ability to Manage Growth
The Company's objective is to continue to grow by expanding its services in
markets where it can be one of the largest and most profitable fully-integrated
solid waste management companies. Accordingly, the Company may experience
periods of significant rapid growth. Such growth, if it were to occur, could
place a significant strain on the Company's management and its operational,
financial and other resources. It cannot be assured that the Company will be
able to expand its operational and financial systems and controls or recruit the
appropriate personnel in an efficient manner at a pace consistent with such
contemplated growth.
Uncertain Ability to Attract and Retain Personnel
The Company's future success is highly dependent upon the ability to identify,
hire, train and motivate a sufficient number of highly qualified personnel for
the Company's planned growth. The Company faces competition for recruiting
qualified personnel from our competitors, other companies not in the waste
management industry, government entities and other organizations. It cannot be
assured that the Company will be successful in attracting and retaining
qualified personnel as required for planned operations.
Ability to Identify, Acquire and Integrate Acquisition Targets
The future success of the Company is highly dependent upon the Company's
continued ability to successfully identify, acquire and integrate additional
solid waste collection, recycling, transfer and disposal businesses. As
competition for acquisition candidates increases within the solid waste
management industry, the availability of suitable candidates at terms favorable
to the Company may decrease. The Company competes for acquisition candidates
with larger, more established companies that may have significantly greater
capital resources than the Company, which can further decrease the availability
of suitable acquisition candidates. There can be no assurance that the Company
will be able to identify suitable acquisition candidates, obtain necessary
financings on favorable terms or successfully integrate any acquisitions with
current operations.
The Company believes that a significant factor in its ability to consummate
acquisitions will be the attractiveness of the Company's Common Stock as
consideration for potential acquisition targets. This attractiveness may, in
large part, be dependent upon the relative market price and capital prospects of
the Company's equity securities as compared to the equity securities of its
competitors. If the market price of the Company's Common Stock were to decline,
the Company's ability to implement its acquisition program through the issuance
of its Common Stock could be materially adversely affected. Ability to Manage
Growth
The Company's objective is to continue to grow by expanding its services in
markets where it can be one of the largest and most profitable fully-integrated
solid waste management companies. Accordingly, the Company may experience
periods of significant rapid growth. Such growth, if it were to occur, could
place a significant strain on the Company's management and its operational,
financial and other resources. Any failure to expand its operational and
financial systems and controls or to recruit appropriate personnel in an
efficient manner at a pace consistent with such growth could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company's future success is also highly dependent upon its continuing
ability to identify, hire, train and motivate highly qualified personnel. The
Company faces competition for hiring such personnel from other companies,
government entities and other organizations. There can be no assurance that the
Company will be successful in attracting and retaining qualified personnel as
required for its projected operations.
Limitations on Landfill Permitting and Expansion
The Company's operations depend on its ability to expand the landfills it owns
or operates and develop or acquire new landfill sites. There can be no assurance
that the Company will be successful in obtaining new landfill sites or expanding
the permitted capacity of its existing landfills. The process of obtaining
required permits and approvals to operate and expand landfills and transfer
stations has become increasingly difficult and expensive. The process can take
several years and involves hearings and compliance with zoning, environmental
and other requirements. There can be no assurance that the Company will be
successful in obtaining and maintaining required permits. Even when granted,
final permits to expand are often not approved until the remaining capacity of a
landfill is very low. In the event the Company exhausts its permitted capacity
at one of its landfills, the Company's ability to expand internally will be
limited and the Company will be required to cap and close such landfill. In
addition, the Company could be forced to dispose of its waste at landfills
operated by its competitors. The additional costs could have a material adverse
effect on the Company's business.
Dependence on Management
The Company's future success is highly dependent upon the services of its
executive officers, particularly Philip Strauss, Chairman, Chief Executive
Officer and President of the Company, and Robert Rivkin, Executive Vice
President-Acquisitions, Treasurer and Secretary of the Company. The Company has
obtained key executive insurance policies in the amount of $1.0 million with
respect to each of Messrs. Strauss and Rivkin. Should the Company lose the
services of either of them for a significant period of time, the Company could
experience a disruption in its operations that could potentially cause the
Company to miss an acquisition, fail to complete a project on a timely basis or
manage growth at a critical juncture.
Failed Acquisitions or Capital Projects
In accordance with generally accepted accounting principles, the Company records
some expenditures and advances relating to acquisitions, pending acquisitions
and landfill projects as assets on the balance sheet, then amortize or
depreciate these capitalized expenditures and advances over time, usually
matching an asset's depreciation against the revenues it generates. The Company
also has an accounting policy to record as an expense in the current accounting
period all unamortized capital expenditures and advances relating to any
operation that is permanently shut down, any acquisition that will not be
consummated, and any landfill project that is terminated. As a result of these
accounting practices, the Company may have to record the entire capitalized
expenditure of any failed acquisition or terminated project as a charge against
earnings in the accounting period in which the failure or termination occurs. A
large unexpected expense against typical earnings could have a material adverse
effect on the Company's results of operations, financial condition and the
business.
Competition
The solid waste management industry is highly competitive, very fragmented and
requires substantial labor and capital resources. Competition exists for
collection, recycling, transfer and disposal services, and acquisition targets.
The markets the Company competes or is likely to compete in are usually served
by one or more of the large national, regional or local solid waste companies
who may have accumulated substantial goodwill and/or have greater financial,
marketing or technical resources than those available to the Company. The
Company also competes with counties, municipalities and operators of alternative
disposal facilities that operate their own waste collection and disposal
facilities. The availability of user fees, charges or tax revenues and the
availability of tax-exempt financing may provide a competitive advantage to the
public sector. Additionally, alternative disposal facilities such as recycling
and incineration may reduce the demand for the disposal of solid waste in
landfills. Competition for waste collection and disposal business is based on
price, the quality of service and geographical location. From time to time,
competitors may reduce the price of their services in an effort to expand or
maintain market share or to win competitively bid contracts. There can be no
assurance that the Company will be able to successfully bid such contracts or
compete with the larger and better-capitalized companies.
Geographic Concentration of Operations
The Company has established solid waste management operations in Vermont,
Central Pennsylvania, Eastern New England, Baltimore, MD/Washington D.C. and
Upstate New York. Since the Company's current primary source of revenues will be
concentrated in these geographic locations, the Company's business, financial
condition and results of operations could be materially affected by, without
limitation, the following: (i) downturns in these local economies, (ii) severely
harsh weather conditions and (iii) state regulations. Additionally, the growing
competition within the local economies for waste streams may make it
increasingly difficult to expand within these regions. There can be no assurance
that the Company will be able to continue to increase the waste stream to its
landfills or be able to expand its geographic markets to mitigate the effects of
adverse events that may occur in these regions.
Seasonality
The Company's revenues and results of operations tend to vary seasonally. The
winter months of the fourth and first quarters of the calendar year tend to
yield lower revenues than those experienced in the warmer months of the second
and third quarters. The primary reasons for lower revenues in the winter months
include, without limitation: (i) harsh winter weather conditions which can
interfere with collection and transportation, (ii) the construction and
demolition activities which generate landfill waste are primarily performed in
the warmer seasons and (iii) the volume of waste in the region is generally
lower than that which occurs in warmer months. The Company believes that the
seasonality of the revenue stream will not have a material adverse effect on the
Company's business, financial condition and results of operations on an
annualized basis.
Environmental and Government Regulations
The Company and its customers operate in a highly regulated environment, and in
general the Company's landfill projects will be required to have federal, state
and/or local government permits and approvals. Any of these permits or approvals
may be subject to denial, revocation or modification under various
circumstances. In addition, if new environmental legislation or regulations are
adopted or existing legislation or regulations are amended or are interpreted or
enforced differently, the Company or its customers may be required to obtain
additional operating permits or approvals. There can be no assurance that the
Company will meet all of the applicable regulatory requirements. Any delay in
obtaining required permits or approvals will tend to cause delays in the
Company's ability to obtain project financing, resulting in increases in the
Company's need to invest working capital in projects prior to obtaining more
permanent financing, and will also tend to reduce project returns by deferring
the receipt of project revenues. In the event that the Company is required to
cancel any planned project as a result of the inability to obtain required
permits or other regulatory impediments, the Company may lose any investment it
has made in the project up to that point, and the cancellation of any landfill
projects may have a materially adverse effect on the Company's financial
condition and results of operations.
Potential Environmental Liability and Adverse Effect of Environmental Regulation
The Company's business exposes it to the risk that it will be held liable if
harmful substances escape into the environment and cause damages or injuries as
a result of its operating activities. Moreover, federal, state and local
environmental legislation and regulations require substantial expenditures and
impose significant liabilities for non-compliance. The Company believes that it
is currently in material compliance with all applicable environmental laws.
Potential Adverse Community Relations
The potential exists for unexpected delays, costs and litigation resulting from
community resistance and concerns relating to existing and acquired operations
and proposed future development of solid waste facilities.
Performance or Surety Bonds and Letters of Credit
The Company may be required to post a performance bond, surety bond or letter of
credit to ensure proper closure and post-closure monitoring and maintenance at
its landfills and transfer stations. It cannot be assured that the Company will
be able to obtain the required performance bonds, surety bonds or letters of
credit in sufficient amounts or at acceptable rates.
Environmental Impairment Liability Insurance
The Company has environmental impairment liability insurance policies at each of
its operating landfills, which cover claims for sudden or gradual onset of
environmental damage at its landfills, in addition to a $20 million umbrella
policy as excess coverage. If the Company were to incur liability for
environmental damage in excess of its primary insurance limits, its financial
condition, results of operations and liquidity could be adversely affected. The
Company carries a $2 million comprehensive general liability insurance policy
which management considers adequate at this time to protect its assets and
operations from other risks.
Adequacy of Accruals for Closure and Post-Closure Costs
The Company has material financial obligations relating to closure and
post-closure costs of its existing landfills and any landfill it may purchase or
operate in the future. The Company estimates and accrues closure and
post-closure costs based on engineering estimates of landfill usage and
remaining landfill capacity. There can be no assurance that the Company's
financial obligations for closure and post-closure costs will not exceed the
amount accrued.
Inflation
The Company does not believe its operations have been materially
affected by inflation.
Item 8. Financial Statements and Supplementary Data
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
Page
Independent Auditors' Report 28
Consolidated Balance Sheets at December 31, 1999 and 1998 29
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997 30
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 31
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1999, 1998 and 1997 32
Notes to Consolidated Financial Statements 33-46
<PAGE>
Independent Auditors' Report
The Board of Directors
Waste Systems International, Inc.:
We have audited the accompanying consolidated balance sheets of Waste Systems
International, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Waste Systems
International, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
March 28, 2000
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 12,871,773 $ 193,613
Accounts receivable, less allowance for doubtful accounts of
$815,219 at December 31, 1999 and $222,028 at December 31,1998 9,294,149 5,235,534
Prepaid expenses and other current assets (Note 4) 2,463,005 4,769,285
-------------- -------------
Total current assets 24,628,927 10,198,432
Property and equipment, net (Notes 3 and 5) 174,957,281 44,685,735
Intangible assets, net (Notes 3 and 6) 47,860,406 38,059,374
Other assets 7,646,477 3,173,158
-------------- --------------
Total assets $ 255,093,091 $ 96,116,699
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt and notes payable (Note 7) $ 1,383,995 $ 8,259,922
Accounts payable 14,712,075 3,849,632
Accrued expenses (Note 8) 14,734,758 2,742,539
Deferred revenue 1,893,576 1,866,128
-------------- --------------
Total current liabilities 32,724,404 16,718,221
Long-term debt and notes payable (Note 7) 172,715,823 74,861,187
Landfill closure and post-closure costs (Note 10) 2,800,471 2,798,597
-------------- --------------
Total liabilities 208,240,698 94,378,005
-------------- --------------
Commitments and Contingencies (Notes 7 and 11)
Stockholders' equity (Notes 12, 13 and 14):
Common stock, $.01 par value. Authorized 75,000,000 shares;
20,330,844 and 11,718,323 shares issued and outstanding
at December 31, 1999 and December 31, 1998, respectively 203,309 117,184
Series D Preferred Stock $.001 par value Authorized 1,000,000 shares;
Preferred Stock; 20,500 shares designated, 15,000 and 0 shares issued
and outstanding at December 31, 1999 and 1998, respectively. 15,000,000 -
Additional paid-in capital 96,318,442 37,810,712
Accumulated deficit (64,669,358) (36,189,202)
--------------- --------------
Total stockholders' equity 46,852,393 1,738,694
--------------- --------------
Total liabilities and stockholders' equity $ 255,093,091 $ 96,116,699
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 54,666,320 $ 21,044,584 $ 3,457,692
Cost of operations:
Operating expenses 37,921,091 12,399,529 1,718,214
Depreciation and amortization 11,974,460 4,501,424 692,224
Acquisition integration costs (Note 3) 2,852,736 1,864,535 -
Write-off of project development costs (Note 17) - 235,464 1,495,388
----------- ------------ -------------
Total cost of operations 52,748,287 19,000,952 3,905,826
Gross profit (loss) 1,918,033 2,043,632 (448,134)
Selling, general and administrative expenses 9,237,049 4,482,478 2,138,180
Restructuring (Note 16) - - 596,426
------------- ------------- --------------
Loss from operations (7,319,016) (2,438,846) (3,182,740)
Other income (expense):
Royalty and other income (expense), net (Note 15) (1,259,148) (134,455) (515,875)
Interest income 479,755 441,069 172,363
Interest expense and financing costs (14,579,571) (4,073,693) (1,354,614)
Non-cash charge for debt conversion (Note 7) (5,583,717)
Write-off of accounts receivable (Note 15) - - (568,217)
---------------- ------------- ---------------
Total other income (expense) (20,942,681) (3,767,079) (2,266,343)
Loss before income tax expense/(benefit), (28,261,697) (6,205,925) (5,449,083)
and extraordinary item
Income tax expense/(benefit) (Note 9) (5,899) 43,174 5,622
Loss before extraordinary item (28,255,798) (6,249,099) (5,454,705)
Extraordinary item - loss on extinguishment of debt (224,358) (246,535) (133,907)
Net Loss (28,480,156) (6,495,634) (5,588,612)
Preferred stock dividends - (887,869) (133,907)
-------------- ------------- ------------
Net loss available for common shareholders $(28,480,156) $ (7,383,503) $ (5,722,519)
Basic net loss per share:
Loss from before extraordinary item $ (1.81) $ (0.97) $ (1.51)
Extraordinary item (0.01) (0.03) (0.04)
------ ------ ------
Basic net loss per share $ (1.82) $ (1.00) $ (1.55)
Weighted average number of shares used in
Computation of basic net loss per share 15,588,959 7,389,547 3,612,623
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (28,480,156) $ (6,495,634) $ (5,588,612)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 11,974,460 5,248,354 900,549
Non-cash charge for equity conversion 5,583,717 - -
Extraordinary loss on extinguishment of debt 224,358 246,535 133,907
Accrued landfill closure and post-closure costs 748,486 1,154,597 124,000
Write-off of project development costs - 235,284 1,495,388
Write-off of accounts receivable - - 568,217
Issuance of common stock for services - 12,500 44,854
Allowance for doubtful accounts 415,225 176,195 23,333
Changes in assets and liabilities:
Accounts receivable (2,202,303) (2,004,616) 73,503
Prepaid expenses and other current assets 3,553,471 (861,529) (242,092)
Accounts payable 7,877,446 1,372,730 (1,175,139)
Accrued expenses 10,645,929 640,869 62,463
Deferred revenue (547,650) 1,645,124 -
Restructuring - (778,609) (1,006,488)
------------ ------------- -------------
Net cash provided (used) by operating activities 9,792,983 591,800 (4,586,117)
Cash flows from investing activities:
Proceeds from sale of assets - - 800,000
Net assets acquired through acquisitions (84,063,076) (58,340,223) -
Restricted cash and securities - 214,158 956,017
Landfills and other development projects (19,362,028) (5,472,136) (571,420)
Land, buildings, facilities and improvements (850,050) (664,264) -
Machinery and equipment (1,931,135) (189,215) (114,330)
Rolling stock (1,328,563) (1,403,747) (122,905)
Containers (1,176,606) (617,813) (189,109)
Office furniture and equipment (886,585) (684,515) -
Deposits for future acquisitions - (2,210,667) -
Intangible assets (1,628,155) (709,881) -
Landfill closure costs (1,954,771) - -
------------- ------------- ------------
Other assets (1,733,687) (1,860,527) (52,127)
------------- ------------- ------------
Net cash provided (used) by investing activities (114,914,656) (71,938,830) 706,126
-------------- ------------ ------------
Cash flows from financing activities:
Proceeds from the private placement of common stock 15,678,216 - -
Proceeds from the private placement of Series D preferred stock 15,000,000 - -
Repurchase of common stock (3,229,064) - -
Deferred financing and registration costs (4,234,358) (1,808,962) (56,098)
Repayments of notes payable and long-term debt (23,006,422) (15,217,063) (2,445,476)
Borrowings from notes payable and long-term debt 117,500,000 86,449,857 1,143,861
Proceeds from issuance of common stock 91,461 40,406 686,724
Proceeds from issuance of Series A preferred stock - - 7,250,478
Dividends paid - (887,869) -
---------------- -------------- ------------
Net cash provided by financing activities 117,799,833 68,576,369 6,579,489
--------------- --------------- -----------
Increase (decrease) in cash and cash equivalents 12,678,160 (2,770,661) 2,699,498
Cash and cash equivalents, beginning of period 193,613 2,964,274 264,776
----------------- ---------- -------------
Cash and cash equivalents, end of period $ 12,871,773 $ 193,613 $ 2,964,274
====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Total
Preferred Preferred Preferred Preferred Additional Stock-
Stock Stock Stock Stock paid Accumu- holders
Series A Series B Series C Series D Common Stock -in lated equity
Shares Amount Shares Amount Share Amount Shares Amount Shares Amount Capital deficit (deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 - - - - - - - - 3,360,514 33,606 21,334,447(23,217,087)(1,849,034)
Common stock issued in
a private placement - - - - - - - - 172,000 1,720 428,280 - 430,000
Issuance of Series A
Convertible Preferred
Stock, June 1997 97,380 9,737,807 - - - - - - (892,475) - 8,845,332
Purchase minority
interest in the
Company's collection
operations in Vermont,
September 1997 - - - - - - - - 18,667 187 69,813 - 70,000
Exercise of Series E
Warrants to purchase
901 shares of common
stock at $17.50 per
share, November 1997 - - - - - - - - 901 9 15,785 - 15,764
Conversion of Series
A Convertible
Preferred Stock for
common stock at $1.406
per share, September
and October 1997 (4,800) (480,000) - - - - - - 341,334 3,413 476,587 -
Issuance of Series
B Convertible
Preferred Stock, 6%
cumulative annual
dividend, convertible
into common stock at
$6.26 per share,
December. 30, 1997 - - 40,488 4,048,750 - - - - - - - - 4,048,750
Net loss for year
ended December 31,
1997 - - - - - - - - - - - (5,588,612)(5,588,612)
------------------------------------------------------------------------------------------------------------
Balance, December 31,
1997 92,580 9,257,807 40,488 4,048,750 - - - - 3,893,415 38,935 21,432,437(28,805,699)5,972,230
Conversion of Series B
Preferred Stock to
common stock - - (40,488)(4,048,750) - - - - 623,808 6,238 4,042,512 - -
Conversion of Series A
Preferred stock to
common stock (92,580)(9,257,807) - - - - - - 6,590,577 65,906 9,191,901 - -
Expenses associates with
equity transactions - - - - - - - - - - (256,101) - (256,101)
Common stock issued for
services - - - - - - - - 14,766 148 12,352 - 12,500
Common stock issued ins
business combinations - - - - - - - - 567,032 5,670 3,347,494 - 3,353,164
Exercise of options to
purchase common stock - - - - - - - - 28,725 287 40,117 - 40,404
Diviends paid on preferred
stock - - - - - - - - - - - (887,869) (887,869)
Net loss for the year
ended December 31, 1998 - - - - - - - - - - - (6,495,634)(6,495,634)
--------------------------------------------------------------------------------------------------------
Balance, December 31,
1998 - - - - - - - - 11,718,323 117,184 37,810,712(36,189,202)1,738,694
Conversion of Convertible
Subordinated Notes into
common stock - - - - - - - - 2,244,109 22,452 10,423,133 - 10,445,585
Non cash charge from
conversion of Convertible
Subordinated Notes into
common stock - - - - - - - - - - 5,583,717 - 5,583,717
Repurchase of common
stock - - - - - - - - (574,978) (5,750)(3,223,313) - (3,229,063)
Common and preferred
stock issued in
private placements - - - - - - 15,000 15,000,000 2,239,745 22,397 15,655,819 - 30,678,216
Common and Preferred
stock issued in
business combinations - - - - 1,000 11,615,000 - - 2,904,330 29,037 19,309,202 - 30,953,239
Exercise of options to
purchase common stock - - - - - - - - 36,315 359 91,101 - 91,460
Conversion of Series C
Preferred Stock to
common stock - - - -(1,000)(11,615,000) - - 1,763,000 17,630 11,597,370 - -
Expenses associates with
equity transactions - - - - - - - - - - (929,299) - (929,299)
Net loss for the year
ended December 31,
1999 - - - - - - - - - - -(28,480,156)(28,480,156)
-------------------------------------------------------------------------------------------------------------
Balance, December 31,
1999 - - - - - - 15,000,000 203,309 (64,669,358) 46,852,393
15,000 20,330,844 96,318,442
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business and Nature of Operations
The Company is an integrated solid waste management company providing
non-hazardous waste collection, recycling, transfer and disposal services to
approximately 73,000 commercial, industrial, residential and municipal customers
located in five regions in the Northeast and Mid-Atlantic regions of the country
as of December 31, 1999. The Company is achieving significant growth by
implementing an active acquisition strategy. (See Note 3).
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: All short-term investments, which have an original
maturity of 90 days or less, and are valued at cost plus accrued interest,
which, approximates market, are considered to be cash equivalents.
Fair Value of Financial Instruments: Statement of Financial Accounting Standards
No. 107, "Disclosures About the Fair Value of Financial Instruments", requires
disclosure of information about the fair value of certain financial instruments
for which it is practicable to estimate that value. For purposes of the
following disclosure the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction between willing
parties other than in a forced sale or liquidation. Management has determined
that the carrying value of its financial assets and liabilities approximates
fair value at December 31, 1999.
Property and Equipment: Property and equipment are stated at cost. The cost of
all routine maintenance and repairs are charged to operations as incurred.
Depreciation for financial reporting purposes is provided using the
straight-line method over the estimated useful lives of the assets as follows:
Transfer Stations, buildings and improvements 10-30 years
Machinery and equipment 3-10 years
Rolling stock 3-10 years
Containers 5-10 years
Office furniture and equipment 3-5 years
Capitalization of landfill development costs begins upon determination by the
Company of the economic feasibility or extended useful life of each landfill
acquired as a result of comprehensive engineering and profitability studies and
with the signing of landfill management contracts for facilities operated by the
Company that are not owned. Capital costs include land acquisition, engineering,
legal, and other direct costs associated with the permitting, development and
construction of new landfills, expansions at existing landfills, and landfill
cell development. These costs are capitalized until all permits are obtained and
operations have commenced.
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. Interest costs of
approximately $1,516,000, $360,000, and $24,000 were capitalized during 1999,
1998 and 1997, respectively.
Landfill development costs are amortized using the unit-of-consumption method,
which is calculated using the total units of airspace filled during the year in
relation to total estimated permitted airspace capacity. The determination of
airspace usage and remaining airspace capacity is an essential component in the
amortization calculation. The determination is performed by conducting annual
topography surveys of the Company's landfill facilities to determine remaining
airspace capacity in each landfill. The surveys are reviewed by the Company's
consulting engineers, the Company's internal operating and engineering staff,
and its financial and accounting staff. Current year-end remaining airspace
capacity is compared with prior year-end remaining airspace capacity to
determine the amount of airspace used during the current year. The result is
compared against the airspace consumption figures used during the current year
for accounting purposes to ensure proper recording of the amortization
provision. The reevaluation process did not materially impact results of
operations for any years presented.
The Company performs assessments for each landfill of the recoverability of
capitalized costs which requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future revenues, estimated economic life and changes in environmental
regulation. It is the Company's policy to periodically review and evaluate that
the benefits associated with these costs are expected to be realized and
therefore capitalization and amortization is justified. Capitalized costs
related to landfill development for which no future economic benefit is
determined by the Company are expensed in the period in which such determination
is made.
Intangible Assets: The Company records the excess of the purchase price over the
fair market value of the net identifiable assets of an acquired company as
goodwill. Goodwill is amortized on a straight-line basis over forty years. Other
intangible assets include customer lists and covenants not to compete, which are
amortized on a straight-line basis over a period not to exceed ten years and
over the term of the agreement, respectively. The Company evaluates the periods
of amortization continually to determine whether subsequent events and
circumstances warrant revised estimates of useful lives. If estimates are
changed, the unamortized cost shall be allocated to the remaining period in the
revised useful life.
Landfill Closure and Post-Closure Costs: The Company has a material financial
obligation relating to closure and post-closure activities for landfills it owns
or operates. Accordingly, the Company estimates and accrues closure and
post-closure costs on a unit-of-consumption basis over each landfill's estimated
remaining permitted airspace capacity. The accrual is based on final capping of
the site, site inspection, leachate management, methane gas control and
recovery, groundwater monitoring, and operation and maintenance costs to be
incurred during the period after the facility closes. The estimated costs are
expressed in current dollars and are not discounted to reflect timing of future
expenditures. The Company has accrued approximately $2.8 million for closure and
post-closure costs in both 1999 and 1998. The engineering and accounting staffs
of the Company periodically review its future obligation for closure and
post-closure costs. If estimates of the permitted air space capacity or the
estimated costs of closure and post-closure have changed, the Company revises
the rates at which it accrues the future costs.
The Company records reserves for landfill closure and post-closure costs, as
necessary, as a component of the purchase price of facilities acquired, in
acquisitions accounted for under the purchase method, when the acquisition is
consummated.
Deferred Financing Costs: Deferred financing costs, which are included in other
assets, are amortized on a straight-line basis over the life of the related
notes payable or debt. There is not a material difference between using the
straight-line method and the effective interest method.
Income Taxes: The Company uses the asset and liability method of accounting for
deferred income taxes.
Revenue Recognition: The Company's revenues are derived primarily from its
collection, recycling, transfer and disposal services. The Company records
revenues when the services are performed. The Company occasionally bills
customers in advance of providing the services. Advanced billings are recorded
as deferred revenue.
Cost of operations: Cost of operations includes direct labor, fuel, equipment
maintenance, insurance, depreciation and amortization of equipment and landfill
development costs, accruals for ongoing closure and post-closure regulatory
compliance (for landfills owned), and other routine maintenance and operating
costs directly related to landfill operations. Also included in cost of
operations are payments made to the towns in which each landfill is located in
the form of "Host Town Fees", which are negotiated on a rate per ton basis as
part of the contract with the Town. In Towns where landfills are operated under
management contracts, the Town is responsible for the closure and post-closure
costs related to the landfill.
Earnings Per Share: In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128). SFAS 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share exclude any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share are very similar
to the previously reported fully diluted earnings per share. Earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the SFAS 128 requirements. Weighted average number of common and
common equivalent shares outstanding and earnings per common and common
equivalent shares have been restated to give effect to a one-for-five reverse
stock split effective February 18, 1998.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of: The
Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets to Be Disposed Of", on January 1, 1997, for the year ended
December 31, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be 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 undiscounted 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 amounts of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
cost to sell. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity in 1999, 1998
or 1997.
Reclassifications: Certain amounts in prior year financial statements have been
reclassified to conform to their 1999 presentation.
Note 3. Acquisitions
During 1999, the Company acquired a total of 13 companies, including, 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
Baltimore, Maryland/Washington D.C region. The acquisitions have all been
recorded using the purchase method of accounting and accordingly, the results of
operations of the acquired companies are included in the consolidated statements
of operations since the respective dates of acquisition. The aggregate cost of
the acquisitions was approximately $124,451,000 consisting of approximately
$84,063,000 in cash, $19,338,000 in common stock, $11,615,000 in Series C
Preferred Stock and $9,435,000 in assumed liabilities. The acquisitions have
combined annual revenues of approximately $42.0 million. The acquisitions have
been accounted for using the purchase method of accounting. The purchase prices
were allocated to the assets and liabilities of the acquired companies based on
their respective fair values at the dates of acquisition as follows: property
and equipment of approximately $110,211,000, intangible assets of $10,721,000
and other assets of $3,519,000. The excess of the purchase price over the fair
value of the net identifiable assets acquired of approximately $8,512,000 has
been recorded as goodwill and is being amortized on a straight-line basis over
forty years.
During 1998, the Company acquired a total of 34 companies, including eleven
collection companies (one of which included a transfer station) in Vermont, five
collection companies and two landfills in Central Pennsylvania, three collection
companies and a transfer station in Eastern New England and twelve collection
companies (one of which included a transfer station) in Upstate New York. The
aggregate cost of these acquisitions was approximately $63.2 million consisting
of approximately $58.3 million in cash, $3.4 million in stock and approximately
$1.5 million in assumed liabilities. The acquisitions have all been recorded
using the purchase method of accounting and accordingly, the results of
operations of the acquired companies are included in the consolidated statements
of operations since the respective dates of acquisition. The purchase prices
were allocated to the assets and liabilities of the acquired companies based on
their respective fair values at the dates of acquisition as follows: the Company
acquired property and equipment of $24,298,000, intangible assets of $38,524,000
and other assets of $337,000.
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 cost activities are generally completed within one
year from the date of acquisition, new expenses and accruals are booked each
quarter as they are incurred. Acquisition integration costs totaled
approximately $2,853,000 and $1,864,000 for 1999 and 1998, 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 years ended December 31, 1999 and 1998, as if the acquisitions had
occurred as of January 1, 1999 and 1998, respectively, 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.
<PAGE>
December 31,1999 December 31, 1998
(Unaudited) (Unaudited)
Net revenues $ 70,461,000 $71,311,000
============ ===========
Net loss $(25,298,000) $(9,088,000)
============= ============
Basic loss per share $ (1.62) $ (1.23)
============ ============
Note 4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following;
December 31,
1999 1998
Deposits for future acquisitions $ - $ 2,210,667
Prepaid disposal costs 1,455,112 1,922,792
Other prepaid expenses 1,007,893 635,826
------------ ------------
Total prepaid expenses
and other current assets $ 2,463,005 $ 4,769,285
============ ===========
Note 5. Property and Equipment
Property and equipment are stated at cost and consist of the following;
December 31,
1999 1998
Landfills $ 70,206,638 $ 18,631,409
Transfer Stations, buildings and improvements 77,445,686 4,701,245
Machinery and equipment 9,028,635 3,038,700
Rolling stock 16,175,247 8,980,626
Containers 9,455,373 4,104,397
Capital Development Projects 4,103,697 8,778,901
Office furniture and equipment 1,665,320 713,235
------------ ---------
188,080,596 48,948,513
Less accumulated depreciation and amortization (13,123,315) (4,262,778)
------------ -----------
Property and equipment, net $174,957,281 $ 44,685,735
============ ============
Note 6. Intangible Assets
Intangible assets consist of the following;
December 31,
1999 1998
Goodwill $ 40,791,022 $ 30,441,948
Non-compete agreement 5,792,435 4,333,685
Customer lists 4,817,599 3,841,599
Other 722,161 713,235
---------- --------
52,123,217 39,330,467
Less accumulated amortization (4,262,811) (1,271,093)
----------- -----------
Total intangible assets $ 47,860,406 $ 38,059,374
============ ============
<PAGE>
Note 7. Long-term Debt and Notes Payable
Long-term debt and notes payable consists of:
December 31,
1999 1998
11.5% Senior Notes $ 100,000,000 $ -
7% Convertible Subordinated Notes 49,551,426 60,000,000
BankNorth Group Credit Facility 17,500,000 10,000,000
13% Short-term Notes - 7,500,000
10% Convertible Subordinated Debenture 450,000 1,850,000
Capital Leases 1,104,288 1,201,516
Equipment and Other Notes Payable 5,494,104 2,569,593
----------- ---------
174,099,818 83,121,109
Less current portion 1,383,995 8,259,922
------------ ----------
Long-term portion $ 172,715,823 $ 74,861,187
============= ============
Scheduled maturities of long-term debt and notes payable, excluding capital
leases are as follows:
Payments due in the year ending December 31,
2000 $ 1,291,582
2001 2,106,571
2002 18,346,981
2003 914,662
2004 784,308
Thereafter 149,551,426
$ 172,995,530
Senior Notes Offering and Debt Repayment. On March 2, 1999, the Company
completed a private placement of $100.0 million of 11.5% 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 11.5% per
annum, payable semi-annually in arrears on each January 15 and July 15,
commencing July 15, 1999, 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 offering.
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 from September 2,
1999, 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. The net
proceeds to the Company, after deducting the discount to the initial purchaser
and related issuance costs, was approximately $97.3 million. The Company used a
portion of the proceeds from the Senior Notes to repay existing debt and
completed several acquisitions. The remainder was used for general corporate
purposes.
Convertible Subordinated Notes. On May 13, 1998, the Company closed an offering
of $60.0 million in 7% Convertible Subordinated Notes, which resulted in net
proceeds to the Company of approximately $58.3 million. 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 Offer. 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% 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. The preferred stock is redeemable at any time by
the Company at par plus accrued and unpaid dividends and, subject to any
required stockholder approval, 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.
BankNorth Group 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 December 31, 1999, the Company had borrowed
$17,500,000 against the credit facility and the interest rate at December 31,
1999 was 9.5%. At December 31, 1999 the Company was in violation of certain
covenants required under the credit facility. The BankNorth Group agreed to
waive the covenants at December 31, 1999.
13% Short-term Notes. At December 31, 1998 the Company had outstanding debt in
the principal amount of $7,500,000 to BIII Capital Partners, L.P., a significant
shareholder of the Company. The debt consisted of 13% Short Term Notes due June
30, 1999. The Short Term Notes were repaid in full in March 1999.
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
$10,085,587. The Notes mature on September 30, 2000, and bear interest at 10%,
payable quarterly. The Notes are convertible into Common Stock at $9.20 per
share and are callable at the Company's option at any time if the closing sale
price of the Common Stock exceeds $50.00 per share for a period of 20
consecutive trading days prior to redemption notice. The Notes have not been
registered under the Securities Act and may not be sold in the United States
without such registration or an applicable exemption from the requirement of
registration.
Capital Leases. The Company leases certain facilities, equipment, and vehicles
under agreements, which are classified as capital leases.
Leased capital assets included in property and equipment are as follows:
December 31,
1999 1998
Land and Buildings $ 1,327,161 $ 1,327,161
Accumulated depreciation (69,598) (38,667)
---------- --------
$ 1,257,563 $ 1,288,494
=========== ===========
Future minimum lease payments, by year and in the aggregate, under
non-cancelable capital leases and operating leases with initial or remaining
terms of one year or more at December 31, 1999 are as follows:
Capital Operating
Leases Leases
Payments due in the year ending December 31,
2000 $ 200,040 $ 780,316
2001 200,040 535,161
2002 200,040 366,805
2003 200,040 91,904
2004 200,040 -
Thereafter 566,780 -
------- -----------
Minimum lease payments 1,566,980 $ 1,774,186
===========
Less: amount representing interest 462,692
Present value of net minimum lease payments 1,104,288
Less current portion 92,413
Long-term portion $ 1,011,875
===========
The Company's rental expense for operating leases was $809,368, $388,630, and
$81,757 for the years ended December 31, 1999, 1998 and 1997, respectively.
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
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
December 31,
1999 1998
Interest $ 7,457,319 $ 212,191
Acquisition integration costs 304,400 676,703
Professional and consulting fees 420,655 125,410
Compensation and benefits 1,809,348 432,089
Other taxes and fees 871,982 449,509
Due to sellers for acquired businesses - 260,000
Accrued transportation and disposal costs 893,673 210,021
Accrued operating costs 1,807,769 143,600
Other 1,169,612 233,016
--------- -------
$ 14,734,758 $ 2,742,539
============ ===========
Note 9. Income Taxes
Income tax expense (benefit) consists of:
Current Deferred Total
Year ended December 31, 1999:
Federal $ - $ - $ -
State (5,899) - (5.899)
----------- ----------- --------
$ (5,899) $ - $ (5,899)
============= ============ ========
Year ended December 31, 1998:
Federal $ - $ - $ -
State 43,174 - 43,174
-------------- ------------ ---------
$ 43,174 $ - $ 43,174
=============== ============ ========
Year ended December 31, 1997:
Federal $ - $ - $ -
State 5,622 - 5,622
----- - ------
$ 5,62 $ - $ 5,622
============== ========== =======
A reconciliation between federal income tax expense (benefit) at the statutory
rate and the Company's federal tax expense (benefit) is as follows for the years
ended December 31:
1999 1998 1997
------------------------------------------
Statutory Federal income (benefit) $(9,685,259) $ (2,193,836) $ (1,898,217)
State Taxes, net of Federal
income tax benefit (2,791,406) (3,460,328) (530,947)
Valuation allowance 12,327,972 5,533,239 2,432,087
Other 142,794 164,100 2,699
------------- ------- -----------
$ (5,899) $ 43,174 $ 5,622
============= =========== ============
The tax effects of temporary differences between financial statement and tax
accounting that gave rise to significant portions of the Company's net deferred
tax assets and deferred tax liabilities at December 31, 1999 and 1998 are
presented below.
1999 1998
-------------- ----------------
Deferred tax assets:
Accounts receivable allowance $ 1,050,620 $ 303,207
Other accrued liabilities 523,354 334,102
Operating loss and credit
carryforwards 27,665,287 14,864,820
---------- ----------
Gross deferred tax assets 29,239,261 15,502,129
Less: valuation allowance (26,983,155) (14,655,182)
----------- ------------
Net deferred tax assets 2,256,106 846,947
Deferred tax liabilities:
Property and equipment depreciation (2,256,106) (846,947)
----------- -----------
Total deferred tax liabilities (2,256,106) (846,947)
------------------ -----------
Net deferred tax liability $ - $ -
================== ==============
The Company has recorded a valuation allowance against its deferred tax assets
because management believes that, after considering all available evidence,
historical and prospective, with greater weight given to historical evidence, it
is more likely than not that assets will not be realized.
At December 31, 1999 the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $64,000,000 which generally are
available to offset future Federal taxable income, if any, and which expire
during the years ending December 31, 2010 through 2019. The Company underwent an
ownership change as defined in Internal Revenue Code Section 382 on June 30,
1997 and as a result will be restricted in its ability to use net operating loss
carryforwards generated prior to the ownership change to offset future taxable
income. The Company's future use of net operating loss carryforwards generated
prior to the ownership change will be subject to an annual limitation generally
equal to the product of the long-term tax exempt rate for June 1997 of 5.64% and
the value of the Company as of June 30, 1997. As a result of this limitation a
portion of the Company's Federal and state net operating loss carryforwards may
expire unused. Additional net operating loss carryforwards and other tax
attributes generated may also be limited in the event of certain changes in
ownership of significant stockholders.
Note 10. Landfill Closure and Post-Closure Costs
Landfills are typically developed in a series of cells, each of which is
constructed, filled, and capped in sequence over the operating life of the
landfill. When the final cell is filled and the operating life of the landfill
is over, the final cell must be capped, the entire site must be closed and
post-closure care and monitoring activities begin. The Company will have
material financial obligations relating to the final closure and post-closure
costs of each landfill the Company owns.
The Company has estimated at December 31, 1999 that the total costs for final
closure and post-closure of Cells I and II at the Moretown, Vermont landfill,
including capping costs, cap maintenance, groundwater monitoring, methane gas
monitoring, and leachate treatment and disposal for up to 30 years, is
approximately $4.2 million. During 1999, the Company paid approximately $700,000
for closure costs at the Moretown landfill. Based upon the capacity of Cells I
and II, approximately $1.3 million and $1.8 million was accrued at December 31,
1999 and 1998, respectively, for final closure and post closure costs. The
Company has estimated at December 31, 1999 that the total costs for final
closure and post-closure of Cells I through IV at Sandy Run, including capping
costs, cap maintenance, groundwater monitoring, methane gas monitoring and
leachate treatment and disposal for up to 30 years, is approximately $4.1
million. Based upon the capacity of Cells I and II, approximately $1.1 and $1.0
million was accrued at December 31, 1999 and 1998 for final closure and post
closure costs. In March 1999, the Company acquired the Cumberland landfill
located in Shippensburg, Pennsylvania. The Company has estimated at December 31,
1999 that the total costs for final closure and post-closure of Cells V through
VII at Cumberland, including capping costs, cap maintenance, groundwater
monitoring, methane gas monitoring and leachate treatment and disposal for up to
30 years, is approximately $5.7 million. During 1999, the Company paid
approximately $1.2 million for closure costs at the Cumberland landfill. Based
upon the capacity of Cells V through VII, approximately $235,000 was accrued at
December 31, 1999 for final closure and post closure costs. On December 28 1999,
the Company opened its Mostoller landfill located in Somerset, Pennsylvania. The
Company has estimated at December 31, 1999 that the total costs for final
closure and post-closure of Cells I through VII at Mostoller, including capping
costs, cap maintenance, groundwater monitoring, methane gas monitoring and
leachate treatment and disposal for up to 30 years, is approximately $7.7
million. At December 31, 1999, the Company had accrued approximately $9,000 for
final closure and post closure costs at the Mostoller landfill, which commenced
operations on December 28, 1999.
The Company bases its estimates for these accruals on respective State
regulatory requirements, including input from its internal and external
consulting engineers and interpretations of current requirements and proposed
regulatory changes. The closure and post-closure requirements are established
under the standards of the U.S. Environmental Protection Agency's Subtitle D
regulations as implemented and applied on a state-by-state basis.
The determination of airspace usage and remaining airspace capacity is an
essential component in the calculation of closure and post-closure accruals. See
Note 2 - Summary of Significant Accounting Policies - Landfill Closure and
Post-Closure Costs.
Note 11. Commitments and Contingencies
Landfill related activities. 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,
the 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. See Note 10 - Landfill
Closure and Post Closure Costs.
The Company has environmental impairment liability insurance policies at each of
its operating landfills, which cover claims for sudden or gradual onset of
environmental damage at its landfills, in addition to a $20 million umbrella
policy as excess coverage. If the Company were to incur liability for
environmental damage in excess of its primary insurance limits, its financial
condition, results of operations and liquidity could be adversely affected. The
Company carries a $2 million 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.
Employment Contracts. The Company has entered into employment agreements with
its two senior executives, which expire on July 1, 2000 and subsequently provide
for employment until terminated by either party at annual salaries of $200,000
through July 1, 1999 and $225,000 through July 1, 2000.
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.
Note 12. Common Stock
Stock Repurchase. During the period from March 3, 1999 through May 13, 1999, the
Company repurchased approximately 575,000 shares of its common stock for an
aggregate cost of approximately $3.2 million. These shares were retired upon
purchase.
Private Placement. 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
$15,678,216, which were used for acquisitions.
Warrants. In connection with the issuance of the Senior Notes on March 2, 1999,
the Company issued 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 are
exercisable from September 2, 1999, 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.
Acquisitions. On July 1, 1999, the Company issued 2,678,620 shares of its Common
Stock in connection with the acquisition of Eastern Trans-Waste of Maryland,
Inc. As a part of this acquisition, the Company authorized and issued 1,000
shares of Series C Preferred Stock at $11,615 per share or $11,615,000 total. In
accordance with the terms of the issuance, on October 21, 1999, the shareholders
approved the conversion of the Series C Preferred Stock at a special meeting and
each share of the Series C Preferred Stock was converted into 1,763 shares of
common stock or 1,763,000 total.
On August 4, 1999, the Company issued 225,710 shares of its Common Stock in
connection with the acquisition of C&J Trucking, Inc. and Affiliates. On
September 22, 1998, the Company issued 455,922 shares of its Common Stock in
connection with the acquisition of Mattei-Flynn Trucking, Inc.
On May 22, 1998, the Company issued 111,110 shares of its Common Stock in
connection with the acquisition of Eagle Recycling, Inc. and Horvath Sanitation,
Inc.
Series A Preferred Stock. During 1998, the Company converted 92,580 shares or
$9,257,807 of its Series A Preferred Stock into 6,590,577 shares of its Common
Stock.
Series B Preferred Stock. On May 14, 1998, the Company converted 40,488 shares
or $4,048,750 of its Series B Preferred Stock into 623,808 shares of its Common
Stock.
Note 13. 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% 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. The preferred stock is redeemable at any time by
the Company at par plus accrued and unpaid dividends and, subject to any
required stockholder approval, 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.
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 December 31, 1997, the Company had outstanding $9,257,807 of principal amount
Series A Convertible Preferred Stock, par value $0.001 per share ("Series A
Preferred Stock"), which was issued in a private placement on June 26, 1997,
bearing an 8.0% annual cumulative dividend. The Series A Preferred Stock was
convertible into common stock at a conversion price of $1.40625 per share of
common stock. On July 27, 1998, the Company met the mandatory conversion trading
requirements and elected to convert all of the remaining shares of Series A
Preferred Stock into 6,590,577 shares of the Company's Common Stock and the
Board of Directors declared and paid cash dividends of approximately $787,000.
At December 31, 1997, the Company also had outstanding $4,048,750 of principal
amount Series B Convertible Preferred Stock, par value $0.001 per share ("Series
B Preferred Stock"). The Series B Preferred Stock was issued on December 31,
1997 in a private placement in exchange for outstanding 10% Convertible
Debentures of the Company, bearing a 6.0% annual cumulative dividend, and was
convertible into common stock at a conversion price of $6.25 per share of common
stock. On May 14, 1998, the Company met the mandatory conversion trading
requirements and elected to convert all of the shares of the Series B Preferred
Stock into 623,808 shares of Common Stock and the Board of Directors declared
and paid cash dividends of approximately $101,000. Note 14. Stock Options
Employee Stock Option Plan. Pursuant to the Company's 1995 Stock Option and
Incentive Plan as amended (the "Plan"), options to purchase up to 3,000,000
shares of Common Stock were reserved for issuance to employees and consultants
of the Company. Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options for purposes of federal income tax law.
Options are generally subject to vesting over a period of four years from the
date of grant and are exercisable only to the extent vested from time to time,
although certain options have provided for earlier vesting. The selection of
individuals to receive awards of options under the Plan and the amount and terms
of such awards may be determined by the Board of Directors of the Company or an
Administering Committee appointed by the Board of Directors. At the Annual
Meeting of the Stockholders of the Company, held June 14, 1999, the number of
shares reserved for issuance under the Plan was increased from 3,000,000 to
4,000,000.
As of December 31, 1999, options to purchase 2,908,643 shares of Common Stock
had been granted and options to purchase up to an additional 1,091,357 shares
remained available for grant. The per share weighted average fair value of stock
options granted during 1999, 1998 and 1997 was approximately $2.28, $3.28 and
$3.73, respectively, using the Black Scholes option-price model with the
following weighted average assumptions: volatility, 50% in 1999, 50% in 1998 and
30% in 1997; expected dividend yield, 0% for all years; risk free interest rate,
5.5% in 1999, 4.75% in 1998 and 5.5% in 1997; and expected life, 5 years for all
years.
The Company applies APB Opinion No. 25 in accounting for stock options and,
accordingly, no compensation cost has been recorded in the financial statements.
If the Company had determined compensation costs based on the fair value of its
stock options at their grant date under SFAS No. 123, the Company's net losses
in 1999, 1998 and 1997 would have increased to the amounts shown below.
1999 1998 1997
---- ---- ----
Net loss available
for common shareholders
- as reported $ (28,480,156) $(7,383,503) $(5,588,612)
- pro forma (30,238,151) (8,662,888) (6,006,315)
Basic net loss per share
- as reported $ (1.82) $ (1.00) $(1.55)
- pro forma $ (1.94) $ (1.17) $(1.66)
Pro forma net loss reflects only the effects of options granted in 1999, 1998
and 1997. Therefore, it does not reflect the full effect of calculating the cost
of stock options under SFAS No. 123 because the cost of options issued prior to
January 1, 1997 are not considered. As a result, it may not be representative of
the pro forma effects on operating results that will be disclosed in future
years.
Changes in options and option shares under the plan during the respective years
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------------------------------------------------------------
Weighted Avg. Weighted Avg. Weighted Avg.
exercise price Number exercise price Number exercise price Number
per share of shares per share of shares per share of shares
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,beginning of year $3.75 2,341,793 $1.42 1,327,417 $1.41 161,200
Options granted 4.55 930,600 6.68 1,121,351 1.43 1,179,217
Options exercised 2.19 (71,275) 1.41 (28,725) - -
Options canceled 6.66 (292,475) 6.82 (78,250) 1.64 (13,000)
Options outstanding, end of year 4.59 2,908,643 3.75 2,341,793 1.42 1,327,417
Shares reserved for future grants 1,091,357 658,207 372,583
Total options in the plan 4,000,000 3,000,000 1,700,000
Options exercisable, end of year $2.58 883,171 $1.42 340,573 $1.42 114,900
======= ======= =======
</TABLE>
On June 30, 1997, the Board of Directors repriced to $1.406 per share any
currently outstanding stock options with exercise prices in excess of $1.406 per
share for all employee participants in the Stock Option Plan at that time. Each
repriced option retained the vesting schedule associated with the original
grant.
Options outstanding at December 31, 1999 and related proceeds to the Company
were as follows:
Remaining Weighted Avg. Number of
Shares Price Exercise Contractual Exercise Options
Under Option Per Share Proceeds Life Price Exercisable
1,245,993 $1.41 $1,830,768 7.38 $ 1.41 673,983
3,000 1.88 - 2.19 43,438 7.73 1.89 1,500
30,000 3.44 103,140 8.17 3.44 7,500
10,000 3.50 35,000 10.00 3.50 -
701,900 4.25 - 4.68 2,991,050 9.33 4.26 -
37,500 4.93 - 5.88 237,450 8.72 5.44 6,875
692,500 6.25 4,328,125 8.33 6.25 171,500
132,500 6.50 - 8.88 950,488 8.49 7.17 8,125
55,250 9.00 - 9.25 498,422 8.42 9.02 13,688
----------- ----------- ----------- ----- ----- --------
2,908,643 $11,017,881 8.51 $ 3.78 883,171
========= =========== =======
Non-Employee Directors Stock Option Plan. Pursuant to the Company's 1995 Stock
Option Plan for Non-Employee Directors as amended, each Director is entitled to
receive a grant of Non Qualified Stock Options to purchase 10,000 shares of the
Company's Common Stock for each calendar year of service as a director of the
Company commencing January 1, 1996. Each such option is subject to vesting at a
rate of 2,500 shares for each year that the holder remains a Director of the
Company. In addition, the plan provides for the issuance of 20,000 fully vested
options upon the election of each new member of the Board of Directors initially
elected after December 24, 1997, excluding employees of the Company. At the
Annual Meeting of the Stockholders of the Company, held August 19, 1998, the
number of shares granted to each Director under the Non-Qualified Stock Option
Plan for Non-Employee Directors as amended was increased to 10,000 from 2,000
for each year that the holder remains a Director of the Company. In addition,
the number of fully vested options upon the election of each new member of the
Board of Directors initially elected after December 24, 1997, excluding
employees of the Company was increased to 20,000 from 4,000.
Changes in options and option shares under the plan during the respective years
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
Weighted Avg. Weighted Avg. Weighted Avg.
exercise price Number exercise price Number exercise price Number
per share of shares per share of shares per share of shares
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year $3.05 77,480 $1.79 27,480 $1.41 19,416
Options granted 5.75 100,000 3.75 50,000 2.28 35,480
Options exercised - - - - - -
Options canceled - - - - 2.15 (27,416)
-------- ------- ---------- -------- ----
Options outstanding,
end of year 4.29 177,480 3.05 77,480 1.79 27,480
======= ====== ======
Options exercisable,
end of year $2.99 61,740 $1.84 22,370 1.84 21,500
====== ====== ======
</TABLE>
<PAGE>
Options outstanding at December 31, 1999 and related proceeds to the Company
were as follows:
Remaining Weighted Avg. Number of
Shares Price Exercise Contractual Exercise Options
Under Option Per Share Proceeds Life Price Exercisable
- ------------ --------- -------- ---- ------ -----------
14,000 $1.41 $ 19,684 7.67 $1.41 11,500
13,480 2.19 29,454 7.33 2.19 12,740
75,000 3.75 281,250 8.00 3.75 37,500
75,000 5.75 431,250 9.00 5.75 -
- ----------- -------- --------- ---- ------ -------
177,480 $4.29 $761,638 9.09 $4.29 61,740
======= ========= ======
Note 15. ScotSafe Ltd/Eurocare Environmental Services, Ltd.
During 1996, the Company entered into a licensing and royalty agreement with
ScotSafe Limited (ScotSafe), a Glasgow, Scotland based company, for the
exclusive rights to use the Company's CFA medical waste processing technology
throughout Europe. During the fourth quarter of 1997 the Company terminated its
licensing agreements with ScotSafe and wrote off the receivable due from
ScotSafe of approximately $570,000 because ScotSafe was in default for failure
to pay the Company royalties due under the terms of the agreement.
Subsequent to the termination, ScotSafe was placed into receivership and
Eurocare Environmental Services, Ltd. (Eurocare) purchased its assets in
December 1997. On February 10, 2000, the Company granted an exclusive European
license for the Company's worldwide-patented medical waste treatment technology
to Eurocare. Simultaneous with the licensing agreement, Eurocare acquired the
United Kingdom-based medical waste operation of Onyx Environmental Services
Limited, a subsidiary of France-based Vivendi. As part of the licensing
agreement, the Company acquired a minority interest in, and the right of first
refusal to acquire Eurocare. All legal actions by both parties have been
dismissed.
Note 16. Restructuring
In March 1996, the Company announced its intention to restructure the Company's
operations to focus its resources and activities on developing a fully
integrated solid waste management company. During the year ended December 31,
1997, the Company recorded restructuring charges of $596,426, for costs
associated with the plan to focus on the development of an integrated solid
waste management company. The costs included accruals for employee severance,
non-cancelable lease commitments, professional fees and litigation costs. The
restructuring was completed in 1997; no restructuring charges were recorded in
1998 or 1999.
Note 17. Fairhaven, Massachusetts Operation
In 1994, WSI entered into a contract with the Town of Fairhaven, Massachusetts
to operate and remodel the Town's existing 26-acre landfill. The Company began
operations at the landfill in 1995. On November 8, 1995, an action was brought
against various parties including the Company relating to the remodeling permits
issued at the Fairhaven landfill, seeking among other things, to appeal the
permits that had been issued. On June 2, 1997, the judge ruled in the Company's
favor. However, based on the extensive delays associated with the litigation and
the engineering impacts of the delays associated with the litigation, which
resulted in the uncertainty of the long-term economic viability of the project,
the Company terminated the project. On February 24, 1998, the Company entered
into a termination agreement with the Town of Fairhaven that required the
Company to perform a certain amount of construction and closure work at the
landfill. Write-off of project development costs in 1998 and 1997 primarily
represent the Company's cost to liquidate the equipment that was used at the
Fairhaven landfill and the costs to close the landfill under the Company's
Termination Agreement with the Town of Fairhaven. The Company wrote off its
capital investment in the project at December 31, 1996. The termination of this
project was completed in 1998. No other amounts are accrued at December 31, 1998
or 1999.
Note 18. Segment Information
The Company adopted the provisions of SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," on January 1, 1999. 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 and
Baltimore Maryland/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. The 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. The
accounting policies of the various segments are the same as those described in
the "Summary of Significant Accounting Policies" in Note 2. 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.
<PAGE>
Summary information by segment as of and for the years ended December 31, 1999,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 % 1998 % 1997 %
---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C> <C>
Integrated Operations
Revenue $41,049,195 100.0% $17,074,831 100.0% $ 3,457,692 100.0%
Income (loss) from operations 309,951 0.7% 1,184,378 6.9% 761,433 22.0%
Depreciation and amortization 10,017,528 23.0% 4,094,211 24.0% 692,224 20.0%
Acquisition integration costs 1,789,472 4.1% 1,094,731 6.4% 0 -
EBITDA 10,327,479 23.7% 5,278,590 30.9% 1,453,657 42.0%
Adjusted EBITDA 12,116,951 27.8% 6,373,321 37.3% 1,453,657 42.0%
Net interest expense (356,042) (0.8%) 344,955 2.0% 177,917 5.1%
Segment assets 204,347,088 - 70,718,236 - 15,119,887 -
Non-Integrated Operations
Revenue $13,617,125 100.0% $3,969,753 100.0% $ - -
Income (loss) from operations (3,075,163) (22.6%) (762,374) (19.2%) - -
Depreciation and amortization 1,840,080 13.5% 407,214 10.3% - -
Acquisition integration costs 1,063,264 7.8% 769,804 19.4% - -
EBITDA (1,235,084) (9.1%) (355,161) (8.9%) - -
Adjusted EBITDA (171,818) (1.3%) 650,107 16.4% - -
Net interest expense - - - - - -
Segment assets 34,509,481 - 20,818,488 - - -
Corporate and Other
Revenue $ - - $ - - $ - -
Income (loss) from operations (4,553,804) - (2,860,851) - (3,944,173) -
Depreciation and amortization 116,852 - 67,396 - 21,516 -
Acquisition integration costs - - - - - -
EBITDA (4,436,951) - (2,793,455) - (3,922,657) -
Adjusted EBITDA (4,436,953) - (2,793,455) - (1,830,843) -
Net interest expense (13,743,781) - 2,949,574 - 1,004,334 -
Segment assets 16,236,522 - 4,579,975 - 3,440,367 -
</TABLE>
<PAGE>
Note 19. Supplemental disclosures of cash flow information:
During the years ended December 31, 1999, 1998, and 1997, cash paid for interest
was $7,128,778, $3,715,304, and $1,493,221, respectively.
1999
On October 21, 1999, a special shareholders meeting was held and the conversion
of the Series C Preferred Stock into common stock was approved. As a result, the
1,000 shares of Series C Preferred Stock were fully converted into 1,763,000
shares of common stock.
On March 31, 1999, the Company issued 2,244,109 shares of the Company's Common
Stock in exchange 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 acquisitions completed during the year, the Company acquired
property and equipment of approximately $110,211,000, intangible assets of
$10,721,000 and other assets of $3,519,000. The aggregate cost of the
acquisitions was approximately $124,451,000 consisting of approximately
$84,063,000 in cash, $19,338,000 in common stock, $11,615,000 in newly issued
Series C Preferred Stock and $9,435,000 in assumed liabilities.
During 1999, the Company acquired equipment of $3.4 million under financing
obligations.
1998
In connection with the Company's acquisitions, during 1998, the Company acquired
property and equipment of $24,298,000, intangible assets of $38,524,000 and
other assets of $337,000. The Company paid $58,340,233 in cash, $3,353,000 in
Common Stock and assumed liabilities from the acquired companies of $1,465,000.
During 1998, the Company acquired assets of $2,114,000, under capital lease
obligations.
During 1998, the Company converted 92,580 shares or $9,257,807 of its Series A
Preferred Stock into 6,590,577 shares of its Common Stock.
On May 14, 1998, the Company converted 40,488 shares or $4,048,750 of its Series
B Preferred Stock into 623,808 shares of its Common Stock.
1997
In December 1997, the Company converted $3,950,000, plus accrued interest, of
its 10% Convertible, Redeemable, Subordinated Notes due October 6, 2000 for
40,488 shares of its Series B Convertible Preferred Stock.
In October 1997, the Company converted 4,800 shares valued at $480,000, of its
Series A Preferred Stock into 341,334 shares of its Common Stock.
In June 1997, the Company issued Series A Preferred Stock valued at $850,000 in
exchange for the remaining 20% minority interest in the Moretown, Vermont
landfill. The Company also issued Series A Preferred Stock valued at $44,854 in
exchange for consulting services.
In June 1997, the Company wrote down assets to their net realizable value of
$863,428 related to the Fairhaven landfill project. This was charged against the
restructuring and current liabilities accrual.
In June 1997, the Company issued Series A Preferred Stock at a value of $700,000
and retired the FDIC loan of $511,093 and accrued interest of $55,000. The pay
off resulted in a realized loss on the early retirement of debt of $133,907.
Note 20. Subsequent Events
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% 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. The preferred stock is redeemable at any time by
the Company at par plus accrued and unpaid dividends and, subject to any
required stockholder approval, 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.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information Regarding Directors
The following table and biographical descriptions set forth certain
information as of March 24, 2000, unless otherwise specified, with respect to
the seven Directors of the Company, all of whom are nominees for reelection at
the 2000 Annual Meeting of Stockholders, based on information furnished to the
Company by each Director.
Directors
Director
Name Age Since
Philip W. Strauss 51 1996
Robert Rivkin 41 1997
Jay Matulich 45 1995
David J. Breazzano 43 1997
Charles Johnston 65 1997
Judy K. Mencher 43 1997
William B. Philipbar 74 1997
- --------------
Philip W. Strauss. Mr. Strauss has been the Chief Executive Officer and
President since March 27, 1996 and Chairman of the Board since June 24, 1996.
Previously Mr. Strauss had been Executive Vice President and Chief Operating
Officer of the Company since September 19, 1995. He has 24 years of experience
in project, business and corporate development. Mr. Strauss was co-founder of
BioMedical Waste Systems, Inc., a publicly held waste management firm, where he
served as Executive Vice President from its inception in 1987 until May 1992 and
as a Director from inception until May 1993.
Robert Rivkin. Mr. Rivkin, a Certified Public Accountant, has been
Executive Vice President - Acquisitions of the Company since April 1998, Vice
President and Chief Financial Officer from March 1995 through July 1999,
Secretary since May 1995 and Treasurer since June 1996. Mr. Rivkin was first
elected to the Board of Directors in June 1997. For the six years prior to
joining the Company, Mr. Rivkin was a principal at The Envirovision Group Inc.,
a full service environmental engineering, consulting and contracting company,
where he was responsible for finance, marketing and strategic planning.
Previously, Mr. Rivkin practiced public accounting in New York, where he
specialized in mergers and acquisitions, initial public offerings and SEC
reporting.
Jay J. Matulich. Mr. Matulich has been a member of the Board of Directors since
March 1995. Mr. Matulich is a Managing Director of International Capital Growth
Limited ("ICG"), formerly Capital Growth International L.L.C. and U.S. Sachem
Financial Consultants, L.P. He has held this position since 1994. From May 1990
to October 1994, Mr. Matulich was a Vice President of Gruntal & Co.,
Incorporated, investment bankers.
David J. Breazzano. Mr. Breazzano has been a member of the Board of Directors
since June 1997. Mr. Breazzano is one of the two principals at DDJ Capital
Management, LLC, which was established in 1996. He has over 20 years of
investment experience and served as a Vice President and Portfolio Manager at
Fidelity Investments ("Fidelity") from 1990 to 1996. Prior to joining Fidelity,
Mr. Breazzano was President and Chief Investment Officer of the T. Rowe Price
Recovery Fund. Mr. Breazzano also serves as a Director of Key Energy Services,
Inc. and Samuel Jewelers, Inc.
Charles Johnston. Mr. Johnston has been a member of the Board of Directors since
June 1997. During the past 10 years he has served on various boards. Mr.
Johnston is currently Chairman of Ventex Technology in Riviera Beach, Florida
and has held that position since 1993. He is also currently Chairman of AFD
Technologies in Jupiter, Florida. He was previously founder, Chairman, and CEO
of ISI Systems, a public company on the American Stock Exchange prior to being
sold to Teleglobe Corporation of Montreal, Canada. Mr. Johnston also serves as
Trustee of Worcester Polytechnic Institute in Worcester, Massachusetts as well
as Trustee for the Institute of Psychiatric Research, University of Pennsylvania
in Philadelphia, Pennsylvania. In addition, he serves as director of the
following companies - Kideo Productions and Infosafe Systems both of New York
City, Hydron Technologies Inc. of Boca Raton, Florida and Spectrum Signal
Processing of Vancouver, British Columbia.
Judy K. Mencher. Ms. Mencher has been a member of the Board of Directors since
August 1997. Ms. Mencher is one of the two principals at DDJ Capital Management,
LLC, which was established in 1996. From 1990 to 1996, Ms. Mencher was at
Fidelity working in the Distressed Investing Group. Prior to joining Fidelity in
1990, Ms. Mencher was a Partner at the law firm of Goodwin, Procter & Hoar LLP
specializing in bankruptcy and creditors' rights.
William B. Philipbar. Mr. Philipbar was first elected a Director of the Company
on May 8, 1996. He resigned as a Director of the Company on June 24, 1997 and
was reelected to the Board on August 20, 1997. Since December 1997, Mr.
Philipbar has been a part-time consultant for the Company in connection with the
Company's consideration of proposed acquisitions and other strategic matters.
Prior to becoming a Director of the Company, Mr. Philipbar served as Chairman of
the Delaware Solid Waste Authority from 1977 to 1987 and was President and Chief
Executive Officer of Rollins Environmental Corp. from 1973 to 1984. He has been
a Director of Matlack Systems, Inc. and Rollins Truck Leasing Corp. since 1993.
Until 1995 he was also an advisor to Charles River Ventures.
The Board of Directors and Its Committees
Board of Directors
The Company's Board of Directors consists of seven members, a majority
of whom is independent of the Company's management. Each director holds office
for a term from election until the next Annual Meeting of the Company's
stockholders and until his or her successor is duly elected and qualified.
The Board of Directors held 6 meetings during fiscal year 1999. Each of
the Company's directors attended at least 67% of the total number of meetings of
the Board of Directors and of the committees of the Company of which he or she
was a member.
The Board of Directors has appointed a Compensation Committee and an Audit
Committee.
Compensation Committee. The Compensation Committee currently consists of Messrs.
Johnston and Strauss and Ms. Mencher. The Compensation Committee makes
recommendations and exercises all powers of the Board of Directors in connection
with certain compensation matters, including incentive compensation and benefit
plans. The Compensation Committee (excluding Mr. Strauss) administers, and has
authority to grant awards under, the Directors' Plan to the employee directors
and management of the Company and its subsidiaries and other key employees. The
Compensation Committee held 2 meetings during fiscal year 1999.
Audit Committee. The Audit Committee currently consists of Messrs. Breazzano,
Matulich and Philipbar. The Audit Committee is empowered to recommend to the
Board the appointment of the Company's independent public accountants and to
periodically meet with such accountants to discuss their fees, audit and
non-audit services, and the internal controls and audit results for the Company.
The Audit Committee also is empowered to meet with the Company's accounting
personnel to review accounting policies and reports. The Audit Committee held 2
meetings during fiscal year 1999.
<PAGE>
Information Regarding Executive Officers
Set forth below is certain information regarding each of the executive
officers of the Company, including their principal occupation and business
experience for at least the last five years.
Name Age Position
Philip Strauss......... 51 Chief Executive Officer and President
Robert Rivkin.......... 41 Executive Vice President - Acquisitions,
Secretary and Treasurer
James Elitzak.......... 39 Vice President and Chief Financial Officer
Joseph Motzkin......... 57 Vice President - Operations
Douglas Martin......... 52 Vice President - Engineering
Mark Popham.......... 45 Vice President - Capital Project Development
Arthur Streeter........ 39 Vice President and General Counsel
- -----------------
The principal occupation and business experience for at least the last
five years of each executive officer of the Company, other than executive
officers also serving as Directors, is set forth below.
James Elitzak. Mr. Elitzak has been Vice President and Chief Financial Officer
of the Company since August 1999. From 1993 to 1999, he was Director of Finance
for Waste Management, Inc. From 1989 to 1993, he was Director of Corporate
Accounting at Wheelabrator Technologies. Mr. Elitzak, a Certified Public
Accountant, has over ten years of solid waste industry experience.
Joseph Motzkin. Mr. Motzkin has been a Vice President of the Company since
August 1996. From 1994 to 1996, Mr. Motzkin was a General Manager at Prins
Recycling Corporation where he established recycling programs, and directed
sales programs and customer service activities. From 1989 to 1994, he was a
General Manager at Laidlaw Waste Systems where he was responsible for their New
England operations. Mr. Motzkin has 26 years of experience in the solid waste
management business.
Douglas Martin. Mr. Martin has been a Vice President of the Company since June
1999. From 1997 to 1999, Mr. Martin was Vice President of Regulatory Offices for
Envirosource. Prior to joining Envirosource, Mr. Martin held the position of
Vice President, Environment, Health and Safety for Chemical Waste Management
from 1992 to 1997.
Mark Popham. Mr. Popham has been Vice President - Capital Project Development
since April 1999. Mr. Popham was Director of Engineering and Operations from
1995 to April 1999. From 1988 to 1993, he was Vice President/Director at United
Waste Systems, Inc.
Arthur Streeter. Mr. Streeter has been Vice President and General Counsel since
February 1998. Prior to joining the Company he was a Partner at Goldstein and
Manello, a 60 lawyer firm based in Boston, Massachusetts where he gained 12
years of experience representing both private and public companies.
Each of the executive officers holds his or her respective office until the
regular annual meeting of the Board of Directors following the annual meeting of
stockholders and until his or her successor is elected and qualified or until
his or her earlier resignation or removal.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the Nasdaq Small-Cap Market. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
the fiscal year ended December 31, 1999, all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than 10% beneficial
owners were satisfied.
Item 11. Executive Compensation
Director Compensation
The Company does not currently pay cash compensation to its directors.
Non-employee directors are entitled to stock option grants under the Amended and
Restated Waste Systems International, Inc. 1995 Stock Option Plan for
Non-Employee Directors (the "Director Plan"). The Director Plan provides for the
automatic granting to Independent Directors (as defined in the Director Plan) of
options that do not qualify as incentive stock options (referred to as "Stock
Options") under Section 422 of the Code. Under the terms of the Director Plan,
each Independent Director who first becomes a Director of the Company on or
after June 30, 1997 shall automatically be granted on the date he or she becomes
a Director of the Company a Stock Option to purchase 20,000 shares of Common
Stock. In addition, the Director Plan provides that each Independent Director
shall automatically be granted, at the beginning of each calendar year in which
he or she is serving as an Independent Director, a Stock Option to acquire
10,000 shares of Stock. Each Independent Director entering service after the
start of any calendar year will automatically be granted on the effective date
of his or her Board membership a Stock Option to acquire a portion of 10,000
shares of Stock prorated to reflect the remaining portion of such calendar year.
The exercise price per share for the Common Stock covered by any Stock Option
granted under the Director Plan shall be equal to the fair market value of the
Common Stock on the date such option is granted.
Other than Stock Options to acquire 20,000 shares of Stock granted
automatically to each new director joining the Board on or after June 30, 1997,
which Stock Options vest immediately upon grant, options granted under the
Director Plan shall vest at a rate of 25% of the total number of shares of
Common Stock purchasable under such option for each year that the holder remains
a Director of the Company, such vesting to take place at the end of each of the
first four calendar years following issuance of such options. An option issued
under the Director Plan shall not be exercisable after the expiration of ten
years from the date of grant.
Executive Compensation
Summary Compensation Table. The following table sets forth the aggregate
cash compensation paid by the Company with respect to the fiscal years ended
December 31, 1999, 1998 and 1997 to the Company's Chief Executive Officer and
the six other senior executive officers in office on December 31, 1999 who
earned at least $100,000 in cash compensation during 1999 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Annual Shares
Compensation Underlying
Salary Options (1)
Name and Principal Position Year ($) (#)
- --------------------------- ----------------------------------
Philip Strauss 1999 212,494 250,000
Chairman of the Board, 1998 188,172 250,000
President and Chief 1997 162,504 522,859
Executive Officer
Robert Rivkin 1999 211,717 250,000
Executive Vice President-Acquisitions, 1998 187,506 250,000
Secretary and Treasurer 1997 162,504 522,859
Joseph Motzkin 1999 137,386 25,000
Vice President - Acquisitions 1998 118,060 40,000
1997 110,000 19,300
Mark Popham(2) 1999 116,639 20,000
Vice President-Capital Project Development
Arthur Streeter(3) 1999 139,101 25,000
Vice-President and General Counsel 1998 118,428 40,000
(1) All information with respect to outstanding options, including shares
issuable or issued and exercise prices payable or paid per share, has been
adjusted to reflect the 1-for-5 reverse stock split effective February 13, 1998.
(2) Includes Mr. Popham's salary for 1999 only as Mr. Popham was promoted in
April 1999.
(3) Includes Mr. Streeter's salary for 1999, 1998 only as Mr. Streeter joined
the Company in February 1998.
Option Grants in Fiscal Year 1999. The following table sets forth the
options granted during fiscal year 1999 and the value of the options held on
December 31, 1999 by the Company's Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1999 (1)
<TABLE>
<CAPTION>
Percent of Total
Number of Options Granted Exercise or
Shares Underlying to Employees in Base Price Expiration Grant Date
Name Options Granted(#) Fiscal Year ($ /share) Date Present Value$(2)
- ---- ------------------ --------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Philip Strauss 250,000 27.7% $4.25 04/12/09 $532,250
Robert Rivkin 250,000 27.7% $4.25 04/12/09 $532,250
James Elitzak 50,000 5.5% $6.50 08/02/09 $162,850
Joseph Motzkin 25,000 2.8% $4.25 04/12/09 $ 53,225
Douglas Martin 20,000 2.2% $7.63 06/21/09 $ 76,400
Mark Popham 20,000 2.2% $4.25 04/12/09 $ 42,580
Arthur Streeter 25,000 2.8% $4.25 04/12/09 $ 53,225
</TABLE>
(1) All information with respect to outstanding options, including shares
issuable or issued and exercise prices payable or paid per share, has
been adjusted to reflect the 1-for-5 reverse stock split effective
February 13, 1998.
(2) The grant date present value was determined using the Black Scholes
option pricing model with the following weighted average assumptions;
volatility, 50%; expected dividend yield, 0%; risk free interest rate,
5.5% and expected life, 5 years.
Option Exercises and Year-End Holdings. The following table sets forth
the options exercised during fiscal year 1999 and the value of the options held
on December 31, 1999 by the Company's Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END 1999 OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options in-the-Money Options
Acquired On Value at Fiscal Year-End(#) at Fiscal Year-End ($)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-------------- ------------------ -------------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip Strauss 0 0 373,929 698,930 $437,948 $1,430,135
Robert Rivkin 0 0 373,929 698,930 437,948 1,430,135
James Elitzak 0 0 - 50,000 - -
Joseph Motzkin 0 0 27,150 67,150 10,547 136,906
Douglas Martin 0 0 - 20,000 - -
Mark Popham 0 0 - 20,000 98,078 25,734
Arthur Streeter 0 0 10,000 55,000 235,405 25,785
</TABLE>
Employment Agreements. On June 30, 1998, the Company and Mr. Strauss
entered into an employment agreement. The terms of the agreement provide (i)
that Mr. Strauss shall serve as the Company's President and Chief Executive
Officer, (ii) that he receive a salary of $200,000 per year through June 30,
1999 and $225,000 per year through June 30, 2000 and (iii) that he agree not to
compete with the Company following termination of his employment for a period of
one year following the termination. In the event that Mr. Strauss is terminated
for cause, he shall not be bound to the non-competition provisions. The
Company's agreement with Mr. Strauss was effective until June 30, 1999 and,
absent ninety-day notice from either party to the contrary, shall be extended
automatically for subsequent one-year terms upon the expiration of the
agreement. The Company's agreement with Mr. Strauss may be terminated at any
time by the mutual consent of the parties.
On June 30, 1998, the Company and Mr. Rivkin entered into an employment
agreement. The terms of the agreement provide (i) that he receive a salary of
$200,000 per year through June 30, 1999 and $225,000 per year through June 30,
2000 per year and (ii) that he agree not to compete with the Company following
termination of his employment for a period of one year following the
termination. In the event that Mr. Rivkin is terminated for cause, he shall not
be bound to the non-competition provisions. The Company's agreement with Mr.
Rivkin was effective until June 30, 1999 and, absent ninety-day notice from
either party to the contrary, shall be extended automatically for subsequent
one-year terms upon the expiration of the agreement. The Company's agreement
with Mr. Rivkin may be terminated at any time by the mutual consent of the
parties.
Compensation Committee Interlocks and Insider Participation
Currently, Philip W. Strauss, Charles Johnston and Judy K. Mencher serve on the
Compensation Committee. Philip W. Strauss, in addition to serving as a member of
the Compensation Committee, is the Chief Executive Officer and President. No
other member of the Compensation Committee in 1997 ever served as an officer of
the Company.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table presents information as to all directors and senior
executive officers of the Company as of March 24, 2000 and persons or entities
known to the Company to be beneficial owners of more than 5% of the Company's
Common Stock as of March 24, 2000, unless otherwise indicated, based on
representations of officers and directors of the Company and filings received by
the Company on Schedules 13D and 13G or Form 13F under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
Beneficial Ownership
Common Stock
--------------------------------
# of Shares % of Class
Directors, Executive Officers Beneficially Beneficially
and 5% Stockholders(1) Owned Owned(2)
- --------------------------------------------------------------------------------
B-III Capital Partners, L.P.(3) 10,286,622 40.5%
c/o DDJ Capital Management, LLC
141 Linden Street
Wellesley, MA 02181
The Prudential Insurance Company of America(4) 2,953,636 13.0%
100 Mulberry Street
Newark, NJ 07102
Mitchell Hutchins Asset Management, Inc.(5) 2,575,694 11.9%
285 Avenue of the Americas
New York, NY 10019
John Hancock Advisers(6) 2,119,065 9.8%
101 Huntington Avenue
Boston, MA 02199
Chilton Investment Company, Inc.(7) 1,759,700 8.5%
320 Park Avenue
New York, NY 10022
Baldwin, L.P.(8) 1,552,656 7.6%
1206 Oyster Cove Drive
Grasonville, MD 21638
David J. Breazzano(9) 12,250 *
Charles Johnston(10) 12,250 *
Jay Matulich(11) 13,000 *
Judy K. Mencher(12) 12,055 *
Joseph Motzkin(13) 69,128 *
William B. Philipbar(14) 66,055 *
Mark Popham(15) 43,200 *
Robert Rivkin(15) 647,597 3.1%
Philip W. Strauss(17) 647,250 3.1%
Arthur Streeter(18) 26,250 *
All directors and officers as a group (11 persons) 1,549,207 7.1%
* Less than 1%
(1) The persons named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them subject to community
property laws where applicable and the information contained in footnotes to
this table.
(2) Based on 20,348,497 shares of Common Stock issued and outstanding as of
March 24, 2000. As of March 24, 2000 the Company had outstanding 7% Convertible
Subordinated Notes due 2005 which are currently convertible at the option of the
holder into an aggregate 2,671,922 shares of Common Stock at a conversion price
of $10.00. The Company had outstanding 15,000 Series D Preferred Stock which are
currently convertible at the option of the holder into an aggregate 2.5 million
shares of Common Stock at a conversion price of $6.00 as. The Company had
outstanding 38,531 Series E Preferred Stock which are currently convertible at
the option of the holder into an aggregate 4,816,375 shares of Common Stock at a
conversion price of $8.00. The Company has outstanding 1,500,000 warrants, which
are currently convertible at the option of the holder into an aggregate
1,500,000 shares of Common Stock at a conversion price of $6.25. In accordance
with Exchange Act rules promulgated by the Commission, the foregoing shares
issuable upon conversion of the 7% Convertible Subordinated Notes are included
in this table only for those holders with the right to acquire such shares
within 60 days from the date of this report, to the extent such holder could
acquire additional shares.
(3) Includes 5,450,533 shares of Common Stock currently owned. Includes
2,231,922 shares issuable upon conversion of 7% Convertible Subordinated Notes
at a conversion price of $10.00, 2,266,667 shares issuable upon conversion of
Series D Preferred at a conversion price of $6.00, and 337,500 shares issuable
upon conversion of Warrants at a conversion price of $6.25. DDJ Capital
Management, LLC ("DDJ") serves as the investment manager to B-III Capital
Partners, L.P. ("B III"); an affiliate of DDJ acts as the general partner of B
III.
(4) Includes 634,761 shares of Common Stock currently owned.Includes 2,093,875
shares issuable upon conversion of Series E Preferred at a conversion price of
$8.00, and 225,000 shares issuable upon conversion of Warrants at a conversion
price of $6.25. The Common Stock and Notes are held for the benefit of certain
registered investment companies over which Prudential or The Prudential
Investment Corporation ("PIC") may have direct or indirect voting and/or
investment discretion, with respect to which Prudential has advised the Company
that Prudential and PIC disclaim beneficial ownership.
(5) Includes 1,231,444 shares of Common Stock currently owned. Includes
1,194,250 shares issuable upon conversion of Series E Preferred at a conversion
price of $8.00, and 150,000 shares issuable upon conversion of Warrants at a
conversion price of $6.25.
(6) Includes 933,315 shares of Common Stock currently owned. Includes 1,155,750
shares issuable upon conversion of Series E Preferred at a conversion price of
$8.00, and 30,000 shares issuable upon conversion of Warrants at a conversion
price of $6.25.
(7) Includes 1,504,700 shares of Common Stock currently owned, and 255,000
shares issuable upon conversion of Warrants at a conversion price of $6.25.
(8) Includes 1,552,656 shares of Common Stock currently owned.
(9) Includes 12,250 shares subject to stock options which are fully vested and
currently exercisable and excludes those shares owned by B III, which Mr.
Breazzano may be deemed to beneficially own as a result of Mr. Breazzano's
interest in DDJ, however, such beneficial ownership is disclaimed. Mr. Breazzano
is a managing member of DDJ.
(10) Includes 12,250 shares subject to stock options, which are fully vested and
currently exercisable.
(11) Includes 2,000 shares of Common Stock currently owned and 11,000 shares
subject to stock options, which are fully vested and currently exercisable.
(12) Includes 12,055 shares subject to stock options which are fully vested and
currently exercisable and excludes those shares owned by B III, which Ms.
Mencher may be deemed to beneficially own as a result of Ms. Mencher's interest
in DDJ, however, such beneficial ownership is disclaimed. Ms. Mencher is a
managing member of DDJ.
(13) Includes 18,403 shares of Common Stock currently owned and 50,725 shares
subject to stock options, which are fully vested and currently exercisable.
(14) Includes 66,055 shares subject to stock options, which are fully vested and
currently exercisable.
(15) Includes 43,200 shares subject to stock options, which are fully vested and
currently exercisable.
(16) Includes 17,953 shares of Common Stock currently owned and 629,644 shares
subject to stock options, which are fully vested and currently exercisable.
(17) Includes 17,778 shares of Common Stock currently owned and 629,644 shares
subject to stock options, which are fully vested and currently exercisable.
(18) Includes 26,250 shares subject to stock options, which are fully vested and
currently exercisable. <PAGE>
Item 13. Certain Relationships and Related Transactions
On December 15, 1997, the Board of Directors voted to retain Mr. William
Philipbar, a Non-Employee Director of the Company, as a part-time consultant in
connection with the Company's consideration of proposed acquisitions and other
strategic matters. Mr. Philipbar's compensation for providing such consulting
services for up to four days per month, as requested by the Company, consists of
grants of options to acquire 25,000 shares of Common Stock to be granted on
January 1 of each year (beginning January1, 1998) so long as Mr. Philipbar
continues to be so retained by the Company. Under such consulting arrangement,
Mr. Philipbar received options on January 1, 1998 and 1999 to acquire 25,000
shares of Common Stock, vesting according to the terms described below. Such
grants are made under an amendment of the Company's Amended and Restated 1995
Stock Option and Incentive Plan (the "Plan") permitting the grant of options and
other benefits under the Plan to Non-Employee Directors, consultants and other
key persons, which was approved by the Company's stockholders at the August 18,
1998 Annual Meeting of Stockholders. Each such option granted to Mr. Philipbar
under such consulting arrangement (a) shall remain outstanding for a term of ten
years, subject to termination 90 days following the date of termination of Mr.
Philipbar's consulting arrangement with the Company; (b) shall be exercisable at
an exercise price per share equal to the closing price of the Common Stock on
its principal trading market on the first trading day on or after the date of
issuance; (c) shall initially be unvested, and shall vest in full on the date
one year after the date of issuance, provided that Mr. Philipbar has been
retained as a consultant by the Company and has been ready, willing and able to
perform services as such consultant during such one year period; and (d) shall
be a non-qualified stock option for income tax purposes.
During 1999, BIII Capital Partners, L.P. (BIII) participated in the Company's
private placements, including the issuance of the 11 1/2% Senior Notes, an
issuance of common stock and an issuance of preferred stock. In March 1999, BIII
purchased Senior Notes with a face value of $22.5 million. During August 1999,
they acquired 571,429 shares of common stock for proceeds of $4,000,000. On
December 28, 1999, they purchased 13,600 shares of Series D preferred stock for
proceeds of $13,600,000.
In addition, at December 31, 1999 BIII holds approximately $22,300,000 of the 7%
Convertible Subordinated Notes due 2005 which were issued by the Company during
1998.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A) 1. Financial Statements
The financial statements are listed under Part II, Item 8 of this Report.
2. Financial Statement Schedules
The financial statement schedules are listed under Part II, Item 8 of this
Report.
3. Exhibits
The exhibits are listed below under Part IV, Item 14(c) of this report.
(B) Reports on Form 8-K
On December 28, 1999, the Company filed a Current Report on Form 8-K, whereby it
announced the completion of a $15 million private placement of Series D
Preferred Stock.
(C) Exhibits
Exhibit No. Description
2.1 Articles of Merger of BioSafe International, Inc., a Nevada Corporation,
with and into Waste Systems International, Inc., a Delaware Corporation, filed
October 24, 1997 (Incorporated by reference to Exhibit 2.1 to Form 10-Q For the
Quarterly Period Ended September 30, 1997 of Waste Systems International, Inc.)
2.2 Certificate of Merger of BioSafe International, Inc., a Nevada Corporation,
with and into Waste Systems International, Inc., a Delaware Corporation, filed
October 24, 1997 and effective October 27, 1997. (Incorporated by reference to
Exhibit 2.2 to Form 10-Q For the Quarterly Period Ended September 30, 1997 of
Waste Systems International, Inc.)
2.3 Agreement and Plan of Merger dated October 17, 1997 by and between BioSafe
International, Inc. a Nevada Corporation and Waste Systems International, Inc. a
Delaware Corporation. (Incorporated by reference to Exhibit 2.3 to Form 10-Q For
the Quarterly Period Ended September 30, 1997 of Waste Systems International,
Inc.)
3(i).1 Second Amended and Restated Certificate of Incorporation of Waste Systems
International, Inc. filed February 13, 1998.
3(i).2 Certificate of Designations of Series B Convertible Preferred Stock of
Waste Systems International, Inc. filed March 5, 1998.
3(i).3 Certificate of Corrections to the Second Amended and Restated Certificate
of Incorporation of Waste Systems International, Inc. as filed February 13,
1998),filed March 17, 1998.
3(ii).1 Bylaws of the Company, adopted and effective as of October 27, 1997.
4.4 Certificate of Designation of Series A Convertible Preferred Stock of Waste
Systems International, Inc. filed October 20, 1997 (Refer to Exhibit 3(i).3
above).
4.5 Certificate of Designation of Series B Convertible Preferred Stock of Waste
Systems International, Inc. filed October 20, 1997 (Refer to Exhibit 3(i).2
above).
4.7 Indenture, dated as of March 2, 1999, between Waste Systems International,
Inc. and IBJ Whitehall Bank & Trust Company, including a form of the 11 1/2%
Senior Note due 2006. (Incorporated by reference to Exhibit No. 4.1 of the
Company's Current Report on Form 8-K, dated March 2, 1999.)
4.8 Warrant Agreement, dated as of March 2, 1999, between Waste Systems
International, Inc. and subsidiaries and IBJ Whitehall Bank & Trust Company, a
New York banking corporation as warrant agent. (Incorporated by reference to
Exhibit No. 4.2 of the Company's Current Report on Form 8-K, dated March 2,
1999.)
4.9 Note Registration Rights Agreement, dated as of March 2, 1999, by and among
Waste Systems International, Inc. and its subsidiaries and First Albany
Corporation. (Incorporated by reference to Exhibit No. 4.3 of the Company's
Current Report on Form 8-K, dated March 2, 1999.)
4.10 Certificate of Designation of the Company's Series D Preferred Stock
(Incorporated by reference to Exhibit No. 99.2 of the Company's Current Report
on Form 8-K, dated March 29, 1999.)
4.11 Certificate of Designation of the Company's Series E Preferred Stock
(Incorporated by reference to Exhibit No. 99.2 of the Company's Current Report
on Form 8-K, dated March 27, 2000.)
4.12 Warrant Registration Rights Agreement, dated as of March 2, 1999, by and
among Waste Systems International, Inc. and its subsidiaries and First Albany
Corporation. (Incorporated by reference to Exhibit No. 4.4 of the Company's
Current Report on Form 8-K, dated March 2, 1999.)
4.13 Purchase Agreement, dated February 25, 1999, by and among First Albany
Corporation and Waste Systems International, Inc. and its subsidiaries.
(Incorporated by reference to Exhibit No. 1.1 of the Company's Current Report on
Form 8-K, dated March 2, 1999.)
10.4 Agreement and Plan of Merger dated as of March 17, 1995, among the Company,
Zoe Resources, Inc., certain stockholders of the Company and BioSafe, Inc.
(Incorporated by Reference to Exhibit 2.1 of the Company's Current Report on
Form 8-K, dated March 29, 1995.)
10.5 1995 Stock Option Plan (Incorporated by Reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K, dated March 29, 1995.)
10.6 Agreement between BioSafe, Inc. and the Town of South Hadley,
Massachusetts, dated August 22, 1995. (Incorporated by reference to Exhibit No.
10.12 to the Registration Statement on Form S-1 of BioSafe International, Inc.,
No. 33-93966 as filed on June 26 1995.)
10.7 Form of 10% Convertible, Redeemable, Subordinated Note Due 2000.
(Incorporated by reference to Exhibit No. 10.15 to the Registration Statement on
Form S-1 of BioSafe International, Inc., No. 33-93966.)
10.8 Form of Exchange Agreement between Waste Systems International, Inc. and
each participating holder in the March 31, 1999 exchange of 7% Convertible
Subordinated Notes for an aggregate of 2,249,109 shares of common stock.
(Incorporated by reference to Exhibit No. 4.5 to the Company's Registration
Statement on Form S-4, No. 33-81341.)
10.9 Form of 11 1/2% Series B Senior Note due 2006 (Incorporated by reference to
Exhibit No. 4.6 to the Company's Registration Statement on Form S-4, No.
33-81341.).
10.10 Form of Exchange Offering Memorandum dated January 18,2000. (Incorporated
by reference to Exhibit No. 99.2 of the Company's Current Report on Form
8-K,dated January 18, 2000.)
21.1 Schedule of Subsidiaries.
27.1 Financial Data Schedules
<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: March 30, 2000 By: /s/ Philip Strauss
------------------
Philip Strauss
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
Date: March 30, 2000 By: /S/ James Elitzak
------------------
James Elitzak
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: March 30, 2000 By: /s/ Philip Strauss
--------------------
Philip Strauss
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
Date: March 30, 2000 By: /S/ Robert Rivkin
--------------------
Robert Rivkin
Executive Vice President -Acquisitions,
Treasurer and Secretary
Date: March 30, 2000 By: /S/ Jay J. Matulich
--------------------
Jay J. Matulich - Director
Date: March 30, 2000 By: /S/ David J. Breazzano
-------------------------
David J. Breazzano - Director
Date: March 30, 2000 By: /S/ Charles Johnston
------------------------
Charles Johnston - Director
Date: March 30, 2000 By: /S/ Judy K. Mencher
---------------------------
Judy K. Mencher - Director
Date: March 30, 2000 By: /S/ William B. Philipbar
----------------------------
William B. Philipbar - Director
<PAGE>
Exhibit 21.1
Schedule of Subsidiaries
As of December 31, 1999
Name and address: EIN
WSI, Inc. 95-4203626
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Medical-Waste Systems, Inc. 04-3377563
(Formerly Biosafe Medical Waste Technology, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Vermont Holdings, Inc. 03-0347845
(Formerly Waste Professionals of Vermont, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Moretown Landfill, Inc. 03-0355691
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Burlington Transfer Station, Inc. 04-33746889
(Formerly Burlington Area Transfer Station, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Waitsfield Transfer Station, Inc. 04-3292469
(Formerly Waitsville Transfer Station, Inc.
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of Vermont, Inc. 03-0354296
(Formerly WPV Disposal, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of Massachusetts Holdings, Inc. 04-3301441
(Formerly Biosafe Buckland, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of Massachusetts Hauling, Inc. 04-3301442
(Formerly Biosafe Fairhaven, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of South Hadley, Inc. 04-3086959
(Formerly Biosafe, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
<PAGE>
WSI Pennsylvania Holdings, Inc. 04-3301448
(Formerly Biosafe Mid-Atlantic, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Sandy Run Landfill, Inc. 04-3301445
(Formerly Biosafe Pennsylvania, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of Pennsylvania, Inc. 04-3301449
(Altoona Hauling)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of Pennsylvania Transportation, Inc. 04-3301450
(Harrisburg Hauling)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Biosafe Systems, Inc. 34-4027808
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Mostoller Landfill, Inc. 25-1622775
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI St. Johnsbury Transfer Station, Inc. 03-3556503
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI New York Holdings, Inc. 04-3428760
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of New York, Inc. 04-3434005
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI of Oxford Transfer Stations, Inc. 04-3454163
Mass Wood Recycling, Inc.
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Maryland Holdings, Inc. 04-3428758
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Palmer Resource Recovery Corporation 16-1557988
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Camden Transfer Station 04-3457679
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Massachusetts Recycling, Inc. 04-3470404
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Somerset Hauling, Inc. 04-3460153
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Community Refuse Service, Inc. 23-1554822
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Mifflin County Landfill, Inc. 04-3480387
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Eastern Trans-Waste of Maryland 52-1294346
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WSI Maryland Hauling, Inc. 04-3480224
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Turner Trucking & Salvage Co., Inc. 04-2628610
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
Spartan Consolidated 02-0417895
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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(Replace this text with the legend)
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