UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q/A
AMENDMENT #1 TO FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-18478
Integrated Waste Services, Inc.
(Exact name of registrant as specified in its charter)
New York 16-1347088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Ganson Street, Buffalo, N.Y. 14203
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (716)-852-2345
(Former name address & fiscal year, if changed since last report)
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 the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date. Common Stock $.01 par value, 9,262,399 shares outstanding
as of May 14, 1996.
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
INDEX PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets 1,2
March 31, 1996 and
December 31, 1995
Consolidated Statements of 3
Operations - Three Months
Ended March 31, 1996 and
March 31, 1995
Consolidated Condensed Statements 4
of Cash Flow - Three Months
Ended March 31, 1996 and
March 31, 1995
Notes to Consolidated Condensed 5, 6
Financial Statements
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7, 8
PART II OTHER INFORMATION
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 9
Signatures 10
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31,
1996 1995
(UNAUDITED)
----------- -----------
CURRENT ASSETS:
Cash $24,507 $35,387
Certificate of deposit,
used as collateral for
performance bond 243,348 243,348
Accounts Receivable, less
allowance of $1,139,000
and $1,283,000 for
possible losses 12,201,080 10,323,256
Prepaid expenses and other 1,145,888 956,910
Deposits 1,656,919 1,579,269
Costs and estimated earnings
in excess of billings on
uncompleted contracts 4,403,230 3,745,862
TOTAL CURRENT ASSETS 19,674,972 16,884,032
PROPERTY AND EQUIPMENT:
Cost 33,004,279 32,302,717
Accumulated Depreciation (11,038,122) (10,481,575)
NET PROPERTY AND EQUIPMENT 21,966,157 21,821,142
OTHER ASSETS:
Investments in net assets and
advances to equity affiliates 100,216 100,216
Deposits 2,048,396 2,053,717
Other, net of accumulated
amortization of $1,589,896 and
$1,564,084 4,490,083 4,859,027
TOTAL OTHER ASSETS 6,638,695 7,012,960
---------- ----------
$48,279,824 $45,718,134
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31 December 31,
1996 1995
(UNAUDITED)
----------- ------------
CURRENT LIABILITIES:
Notes Payable - Bank $3,550,327 $2,473,563
Accounts Payable 9,197,485 9,208,893
Accrued Expenses 3,554,220 3,019,069
Billings in excess of costs
and estimated earnings on
uncompleted contracts 1,842,865 466,190
Current maturities of long -
term debt 5,892,685 5,293,000
TOTAL CURRENT LIABILITIES 24,037,582 20,460,715
LONG - TERM DEBT, less current
maturities 5,728,231 5,861,724
Note Payable - related party 350,305 250,000
DEFERRED INCOME TAXES 16,000 16,000
OTHER LONG - TERM LIABILITIES 679,322 668,991
---------- ----------
30,811,440 27,257,430
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par
value shares authorized
5,000,000; none issued
Common Stock, $.01 par value -
shares authorized, 20,000,000;
issued and outstanding,
9,262,399 in 1996 and in 1995 92,624 92,624
Additional paid-in capital 31,521,614 31,521,614
Cumulative translation
adjustment 28,612 32,371
Deficit (14,174,466) (13,185,905)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 17,468,384 18,460,704
---------- ----------
$48,279,824 $45,718,134
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1996 1995
--------- ----------
Revenues $9,100,285 $10,903,515
Cost of operations 8,281,778 9,172,369
Gross Profit 818,507 1,731,146
Selling, general and
administrative expenses 1,813,455 1,857,179
Other income(expense)
Other income 100,000 --
Interest Expense (128,171) (207,206)
Interest Income 34,558 25,755
Equity in net loss of
affiliated companies -- (41,414)
Gain on the assignment of
the rights to the Royalties
on Countywide Landfill __ 2,821,748
Income(Loss) before taxes on
income (988,561) 2,472,850
Income Tax (Expense) Benefit -- (28,000)
Net Income(Loss) $(988,561) $2,444,850
Weighted average number of
shares of common stock
outstanding 9,262,399 9,560,751
Net Income(loss) per share of
common stock $ (.11) $ .26
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1996 1995
--------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES: $(952,579) (3,429,908)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of royalty
rights -- 6,900,000
Proceeds from sale of assets -- 85,044
Purchase of land, land
options, property and
equipment (701,562) (549,547)
NET CASH PROVIDED(USED) BY
INVESTING ACTIVITIES (701,562) 6,435,497
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in notes payable -
bank 1,076,764 --
Proceeds from revolving line
of credit -- 1,818,853
Proceeds from long term debt 2,853,000 153,330
Principal payments on debt (2,286,503) (5,076,489)
NET CASH USED IN FINANCING
ACTIVITIES 1,643,261 (3,104,306)
DECREASE IN CASH (10,880) (98,717)
CASH BEGINNING OF PERIOD 35,387 253,252
CASH END OF PERIOD $24,507 $154,535
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements included herein have
been prepared by Integrated Waste Services, Inc. ("the
Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and
include all adjustments (consisting of normal recurring
accruals) which are, in the opinion of management, necessary
for a fair presentation. The condensed consolidated
financial statements include the accounts of the Company and
its subsidiaries. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the
disclosures are adequate to make the information presented
not misleading; however, it is suggested that these
financial statements be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995. The financial data for the interim
periods may not necessarily be indicative of results to be
expected for the year.
2. Earnings per share for the three months ended March 31,
1996 and 1995 were based on the weighted average number of
common equivalent shares outstanding during the period.
Common equivalent shares were determined under the treasury
stock method.
3. Certain of the financing agreements between the Company and
Marine Midland Bank, N.A. ("Marine") and HCFS Business
Equipment Corporation ("HCFS") contain covenants which
require, among other things, that the Company and its
subsidiaries maintain certain financial ratios. The Company
is not presently in compliance with its financing agreements
which constitute events of default under the financing
agreements. Pending the Company's request and the lenders
approval of appropriate waivers the Company has classified
all of the HCFS indebtedness as a current liability.
Management believes, although there can be no assurance,
that Marine and HCFS will not take action to collect the
entire balance due under the financing agreements.
Management also believes, although there can be no
assurance, that in the event the financial institutions did
require repayment of the outstanding borrowings under the
financing agreements, the Company would be able to obtain
alternative financing, although such financing may not be
obtained at rates or terms favorable to the Company.
4. In March 1996, the Company refinanced its equipment term
debt with CIT, which totalled approximately $2,066,000 at
December 31, 1995, through the proceeds of a sale/lease back
transaction with T&W Financial Corporation. The transaction
which totalled $2,500,000 included proceeds to purchase new
equipment. The leases require the Company to make 36 equal
installments of $78,825 at the effective interest rate of
10.9%. At the termination of the lease, the Company has the
option to purchase the equipment for 10% of the amount of
the original lease.
5. In May 1996, the Company was granted conceptual approval for
its proposed Farmersville Landfill in a decision from the
commissioner of the New York State Department of
Environmental Conservation.
ITEM 2 Management's discussion and analysis of financial
condition and results of operations.
REVENUES
Revenues decreased by approximately $1.8 million or 16.5%
from approximately $10.9 million for the first three months
of 1995 to approximately $9.1 million in the first three
months of 1996. The decline occurred in all lines of the
business except the Companies construction and demolition
debris transfer station. The decline resulted from the
timing of projects and from the severe winter weather during
the period. Revenues from the Companies construction and
demolition debris transfer station increased as a result of
its relocation and an increase in its permitted volume which
occurred in the fall of 1995.
COST OF OPERATIONS AND GROSS PROFIT
Cost of operations decreased by approximately $0.9 million
from approximately $9.2 million for the first three months
of 1995 to approximately $8.3 million in the first three
months of 1996. The decline was the result of lower
revenues discussed above. The Company's gross profit
percentage also declined from 15.9% in the first three
months of 1995 to 8.2% in the first three months of 1996
again primarily due to reduced volume.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses
decreased by approximately $44,000 or 2.4% in the first
three months of 1996 as compared to the first three months
of 1995.
INTEREST EXPENSE
The Company incurred interest expense of approximately
$354,000 in the first three months of 1996 as compared to
approximately $399,000 in the first three months of 1995, in
which periods interest of approximately $226,000 and
$192,000, respectively was capitalized and $128,000 and
$207,000 was expensed.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 1996, the Company had a working capital deficit
of approximately $4,363,000 as compared to a working capital
deficit of approximately of $3,577,000 at December 31, 1995.
The decrease in working capital as compared to December 31,
1995 is primarily the result of the Company's net loss
during the period and the classification of all of the
Company's equipment term debt with HCFS as a current
liability.
As of March 31, 1996 and 1995 the Company had outstanding,
approximately $15.2 million and $15.7 million respectively,
principle amounts of current maturities of long term debt
and short term debt.
In January 1996, the Company entered into a new $2,350,000
secured revolving line of credit with Marine Midland Bank,
N.A. ("Marine"). Borrowings under the line are limited to
75% of qualified accounts receivable of one of the Company's
subsidiaries. Interest is at prime plus 1.5% payable
monthly and principal is due in January 1997.
The Company's previous secured revolving line of credit with
Marine, which had a balance outstanding at December 31, 1995
of approximately $2,302,000, was restructured in January
1996 to a note due January 1997. Interest is at Prime plus
1.5% payable monthly, principal payments in 1996 are
required based on accounts receivable collections and
proceeds from certain asset sales.
At March 31, 1996, the Company was in violation of certain
financial covenants related to the Marine borrowings. The
Company intends to make a request to Marine for appropriate
waivers of these violations.
In January 1995, the Company's subsidiaries USDC and
U.S.D.C. Environmental, Inc. entered into a $5 million
revolving credit agreement with LaSalle National Bank. The
loan is limited to 80% of eligible accounts receivable and
the loans interest rate is 1.5% above the LaSalle National
Bank prime rate. At March 31, 1996, the Company's
subsidiaries were in violation of certain financial
covenants which violations have been waived by the bank.
The credit agreement is in the process of being renewed.
In March 1996, the Company refinanced its equipment term
debt with CIT, which totalled approximately $2,066,000 at
December 31, 1995, through the proceeds of a sale/lease back
transaction with T&W Financial Corporation. The transaction
which totalled $2,500,000 included proceeds to purchase new
equipment. The leases require the Company to make 36 equal
installments of $78,825 at the effective interest rate of
10.9%. At the termination of the lease, the Company has the
option to purchase the equipment for 10% of the amount of
the original lease.
The Company maintains various equipment term notes and
leases with various entities, which notes and leases were
typically obtained for purchase money financing of equipment
additions and replacements. These notes and leases vary in
term from three to five years.
The Company has a financing agreement with HCFS Business
Equipment Corporation ("HCFS") for equipment term financing.
Interest is 1.25% above the First National Bank of Chicago
prime rate and payments of principal and interest are due
quarterly. At March 31, 1996, the Company was in violation
of its financing agreement with HCFS. Pending the Company's
request and the lenders approval of appropriate waivers the
Company has reflected all outstanding debt with HCFS as a
current liability.
On April 1, 1996, the Company (a 50% owner of the capital
stock of Conwaste Inc. ("Conwaste")) and the owners of the
remaining 50% interest in Conwaste sold substantially all of
the assets used in connection with the operation of Conwaste
to Sanifill Canada Inc., a wholly owned subsidiary of
Sanifill Inc.
In May 1996, the Company was granted conceptual approval for
its proposed Farmersville Landfill in a decision from the
Commissioner of the New York State Department of
Environmental Conservation.
The Company anticipates that it will require additional
financing to fund certain purchases of equipment and
continued development of the Farmersville Landfill. In
addition, although the Company believes it will have
sufficient capital to fund its day-to-day operations there
can be no assurance that the Company will not require
additional financing to fund future operations. If
required, the Company may seek to obtain additional
financing from among others, additional bank financing, the
sale of assets or the sale of securities. However, there
can be no assurance that such financing will be available to
the Company on favorable terms or at all.
Part II
ITEM 3: Defaults upon Senior Securities
Certain of the financing agreements between the Company and
Marine Midland Bank, N.A. ("Marine") and HCFS Business
Equipment Corporation ("HCFS") contain covenants which
require, among other things, that the Company and its
subsidiaries maintain certain financial ratios. The Company
is not presently in compliance with its financing agreements
which constitute events of default under the financing
agreements. Pending the Company's request and the lenders
approval of appropriate waivers the Company has classified
all of the HCFS indebtedness as a current liability.
Management believes, although there can be no assurance,
that Marine and HCFS will not take action to collect the
entire balance due under the financing agreements.
Management also believes, although there can be no
assurance, that in the event the financial institutions did
require repayment of the outstanding borrowings under the
financing agreements, the Company would be able to obtain
alternative financing, although such financing may not be
obtained at rates or terms favorable to the Company.
Signatures
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Integrated Waste Services, Inc.
Registrant
DATE May 17, 1996 BY s/James F. Williams
James F. Williams
Chief Executive Officer and
Principal Financial Officer
