UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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 September 30, 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, 9,269,899 shares outstanding
as of November 8, 1996.
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
INDEX PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets 1, 2
September 30, 1996 and
December 31, 1995
Consolidated Statements of 3, 4
Operations - Three and Six Months
Ended September 30, 1996 and
September 30, 1995
Consolidated Condensed Statements 5
of Cash Flow - Nine Months
Ended September 30, 1996 and
September 30, 1995
Notes to Consolidated Condensed 6, 7
Financial Statements
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8,9,10
PART II OTHER INFORMATION
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 11
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K 12
Signatures 13
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1996 1995
(UNAUDITED)
CURRENT ASSETS:
Cash $175,146 $ 35,387
Certificate of deposit,
used as collateral for
performance bond 182,064 243,348
Accounts Receivable, less
allowance of $1,086,250
and $1,283,000 for
possible losses 16,087,635 10,323,256
Prepaid expenses and other 394,336 956,910
Deposits 1,156,919 1,579,269
Costs and estimated earnings
in excess of billings on
uncompleted contracts 3,275,305 3,745,862
TOTAL CURRENT ASSETS 21,271,405 16,884,032
PROPERTY AND EQUIPMENT:
Cost 34,061,275 32,302,717
Accumulated Depreciation (12,336,380) (10,481,575)
NET PROPERTY AND EQUIPMENT 21,724,895 21,821,142
OTHER ASSETS:
Investments in net assets and
advances to equity affiliates -- 100,216
Deposits 2,143,021 2,053,717
Other, net of accumulated
amortization of $1,638,816 and
$1,564,084 4,453,527 4,859,027
TOTAL OTHER ASSETS 6,596,548 7,012,960
$49,592,848 $45,718,134
See Accompanying Notes to
Consolidated Financial Statements
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
1996 1995
(UNAUDITED)
CURRENT LIABILITIES:
Notes Payable - Bank $ 3,750,000 $ 2,473,563
Accounts Payable 12,407,909 9,208,893
Accrued Expenses 4,137,800 3,019,069
Billings in excess of costs
and estimated earnings on
uncompleted contracts 941,146 466,190
Current maturities of
long - term debt 7,043,732 5,293,000
TOTAL CURRENT LIABILITIES 28,280,587 20,460,715
LONG - TERM DEBT, less
current maturities 7,956,638 6,111,724
DEFERRED INCOME TAXES (136,707) 16,000
OTHER LONG - TERM LIABILITIES 716,282 668,991
TOTAL LIABILITIES 36,816,800 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,
9,269,899 in 1996 and
9,262,399 in 1995 92,699 92,624
Additional paid-in capital 31,537,946 31,521,614
Cumulative translation
adjustment 55,184 32,371
Deficit (18,909,781) (13,185,905)
TOTAL SHAREHOLDERS' EQUITY 12,776,048 18,460,704
$49,592,848 $45,718,134
See accompanying notes to
Consolidated Financial Statements
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
1996 1995
Revenues $15,881,649 $16,088,319
Cost of operations 18,027,412 13,879,271
Gross Profit (Loss) (2,145,763) 2,209,048
Selling, general and
administrative expenses 2,559,337 1,811,474
(4,705,100) 397,574
Other income(expense)
Interest Expense (346,212) (101,664)
Interest Income 41,718 49,277
Equity in net loss of
affiliated companies -- (33,283)
Gain on the assignment of
the rights to the Royalties
on Countywide Landfill -- --
Gain on sale of Conwaste -- --
Other Income 116,447 --
Income(Loss) before taxes on
income (4,893,147) 311,904
Income Tax (Expense) Benefit 125,000 (20,000)
Net Income(Loss) $(4,768,147) $ 291,904
Weighted average number of
shares of common stock
outstanding 9,269,899 9,463,768
Net Income(loss) per share of
common stock $(0.51) $ 0.03
See accompanying notes to
Consolidated Financial Statements
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
Revenues $41,205,417 $39,397,416
Cost of Operations 41,074,544 33,259,678
Gross Profit(Loss) 130,873 6,137,738
Selling, general and
administrative expenses 6,050,233 5,739,280
(5,919,360) 398,458
Other Income (expense)
Interest Expense (502,977) (473,582)
Interest Income 107,014 171,772
Equity in net loss of
affiliated companies -- (89,076)
Gain on the assignment of
the rights to Royalties on
Countywide Landfill -- 2,821,748
Gain on sale of Conwaste 125,000 --
Other Income 341,447
Income(Loss) before taxes
on income (5,848,876) 2,829,320
Income Tax (Expense) Benefit 125,000 (67,000)
Net Income (Loss) $(5,723,876) $2,762,320
Weighted average number of
shares of common stock
outstanding 9,266,149 9,369,806
Net Income(Loss)per share
of common stock $ (0.62) $ 0.29
See accompanying notes to
Consolidated Financial Statements
INTEGRATED WASTE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES: $(2,333,196) $ (112,273)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
royalty rights -- 6,900,000
Proceeds from sale of assets 99,434 136,137
Purchase of land, land options,
property and equipment (2,514,970) (2,182,623)
NET CASH PROVIDED(USED)
BY INVESTING ACTIVITIES (2,415,536) 4,853,514
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in common stock and
additional paid-in-capital 16,407 --
Increase in Notes Payable - Bank 2,150,536 --
Proceeds from revolving
line of credit 1,477,000 2,110,135
Proceeds from long term debt 5,705,318 835,371
Principal payments on debt (4,460,770) (7,903,425)
NET CASH USED IN FINANCING
ACTIVITIES 4,888,491 (4,957,919)
INCREASE(DECREASE)IN CASH 139,759 (216,678)
CASH BEGINNING OF PERIOD 35,387 253,252
CASH END OF PERIOD $ 175,146 $ 36,574
See accompanying notes to
Consolidated Financial Statements
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 and nine months
ended September 30, 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"), HCFS Business
Equipment Corporation ("HCFS") and LaSalle National Bank
("LaSalle") 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 certain of
the HCFS indebtedness as a current liability. Management
believes, although there can be no assurance, that Marine,
HCFS and LaSalle 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.
5. In July 1996, the Company refinanced a portion of its
equipment term debt with HCFS, through the proceeds of a
$500,000 sale/lease back transaction with T&W Financial
Corporation.
6. 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.
7. At the September 19, 1996 annual meeting the stockholders
approved an amendment to the Company's 1990 Stock Option
Plan to increase the number of shares of common stock
reserved for issuance thereunder from 700,000 to 1,400,000
shares and to provide that the options to be granted from
the additional 700,000 shares be granted on or before March
20, 2006.
ITEM 2 Management's discussion and analysis of financial
condition and results of operations.
REVENUES
Revenues increased approximately $1.8 million or 4.6% to
approximately $41.2 million for the first nine months of
1996 as compared to the first nine months of 1995.
Increased demolition, dismantlement and environmental
contracting revenues were offset, in part, by a decline in
industrial cleaning and asbestos removal revenues.
COST OF OPERATIONS AND GROSS PROFIT
Cost of operations increased by approximately $7.8 million
from approximately $33.3 million for the first nine months
of 1995 to approximately $41.1 million in the first nine
months of 1996. The Company's gross profit percentage
declined from 15.6% in the first nine months of 1995 to 0.3%
in the first nine months of 1996. The significant increase
in the cost of operations and reduction in gross profit in
the first nine months of 1996 as compared to the first nine
months of 995 results from project losses primarily within
the companies U.S. Dismantlement Corporation subsidiary.
Between July and October 1996, the Company completed a
series of management and operational changes within the
subsidiary after a pending sale was not consummated in June
1996.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by
approximately $311,000 or 5.4% in the first nine months of
1996 as compared to the first nine months of 1995. The
increase resulted primarily from higher bad debt expense in
the companies U.S. Dismantlement Corporation subsidiary in
September 1996.
INTEREST EXPENSE
The Company incurred interest expense of approximately
$1,202,000 in the first nine months of 1996 as compared to
approximately $1,099,000 in the first nine months of 1995,
in which periods interest of approximately $699,000 and
$625,000, respectively was capitalized and $503,000 and
$474,000 was expensed.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1996, the Company had a working capital
deficit of approximately $7,009,000 as compared to a working
capital deficit of approximately $3,577,000 at December 31,
1995. The deterioration in working capital results from the
Company's net loss during the period offset in part from the
proceeds of long term debt being utilized for working
capital purposes.
As of September 30, 1996 and December 31, 1995 the Company
had outstanding, approximately $18.8 million and $13.9
million respectively, principle amounts of long term debt,
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 September 30, 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 September 30, 1996, the Company's
subsidiaries were in violation of certain financial
covenants under the revolving credit agreement. The Company
intends to make a request to LaSalle National Bank for
appropriate waivers of these violations.
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 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 September 30, 1996, the Company was in
violation of certain covenants contained in its financing
agreement with HCFS. Pending the Company's request and the
lenders approval of appropriate waivers the Company has
reflected certain debt with HCFS as a current liability.
In July 1996, the Company refinanced a portion of its
equipment term debt with HCFS through the proceeds of a
$500,000 sale/lease back transaction with T&W Financial
Corporation.
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 current and 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"), HCFS Business
Equipment Corporation ("HCFS") and LaSalle National Bank
("LaSalle") 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 certain of
the HCFS indebtedness as a current liability. Management
believes, although there can be no assurance, that Marine,
HCFS and LaSalle 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.
ITEM 6: Exhibits and Reports on Form 8K
(a) See Exhibit 27 Financial Data Schedule.
(b) Other information related to dismissal of former
auditor.
Form 8K - Item 4 was filed August 19, 1996 dismissal of
former auditors, BDO Siedman, LLP.
Form 8K - Item 4 was filed August 19, 1996 engagement of J.
D. Elliott & Co., CPA's as principal independent
accountants.
Form 8K/A - Item 4 was filed August 26, 1996 response and
agreement from former auditors BDO Siedman, LLP.
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 November 19, 1966 BY
James F. Williams
Chief Executive Officer and
Principal Financial Officer
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