AMERICAN WASTE SERVICES INC, 10-K, 1997-03-26

AMERICAN WASTE SERVICES INC
10-K, 1997-03-26
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<PAGE>

1996
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended December 31, 1996

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number 1-10599
______________________________

AMERICAN WASTE SERVICES, INC.
(Exact name of registrant as specified in its charter)

Ohio 34-1602983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

One American Way, Warren, Ohio 44484-5555
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (330) 856-8800

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Class A Common Stock, no par value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

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]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------- -------

The aggregate market value of Class A Common Stock of the registrant held by
non-affiliates on February 3, 1997 was $45.2 million. Assuming that the market
value of the Company's Class B Common Stock was the same as its Class A Common
Stock by reason of its one-to-one conversion rights, the market value of Class B
Common Stock of the registrant held by non-affiliates on February 3, 1997 was
$.4 million. The registrant had 25,298,423 shares of its Class A Common Stock
and 5,126,743 shares of its Class B Common Stock outstanding as of March 3,
1997.

Documents Incorporated by Reference

1. Portions of American Waste Services, Inc. Annual Report to Shareholders for
the year ended December 31, 1996 (Parts I and II of Form 10-K).
2. Portions of American Waste Services, Inc. Proxy Statement dated March 21,
1997 (Part III of Form 10-K).

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<PAGE>

AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
_________________________________

As used in this report, the terms "AWS," "Company," and "Registrant" mean
American Waste Services, Inc. and its wholly owned subsidiaries, taken as a
whole, unless the context indicates otherwise.

_________________________________

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Part I
Page

----

<S> <C>

Item 1. Business......................................................................................................... 1

Item 2. Properties....................................................................................................... 12

Item 3. Legal Proceedings................................................................................................ 13

Item 4. Submission of Matters to a Vote of Security Holders.............................................................. 14

Executive Officers of the Registrant......................................................................................... 14

Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................................ 15

Item 6. Selected Financial Data.......................................................................................... 15

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................................................... 15

Item 8. Financial Statements and Supplementary Data...................................................................... 15

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................................................................. 15

Part III
Item 10. Directors and Executive Officers of the Registrant............................................................... 16

Item 11. Executive Compensation........................................................................................... 17

Item 12. Security Ownership of Certain Beneficial Owners and Management................................................... 17

Item 13. Certain Relationships and Related Transactions................................................................... 17

Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................................. 18

Signatures.................................................................................................................... 20

</TABLE>

Note on Incorporation by Reference

Throughout this report various information and data are incorporated by
reference from the Company's 1996 Annual Report to Shareholders (hereinafter
referred to as the "Annual Report to Shareholders"). Any reference in this
report to disclosures in the Annual Report to Shareholders shall constitute
incorporation by reference of that specific material into this Form 10-K.
<PAGE>

PART I

ITEM 1. BUSINESS

General
- -------

The Company was incorporated in Ohio in August 1988 under the name American
Acquisition Corporation. In March 1990, the name of the Company was changed to
American Waste Services, Inc.

In December 1989, after the Company obtained the approval of the Ohio
Environmental Protection Agency (the "Ohio EPA") for the transfer of ownership,
the Company acquired the stock of what is now American Landfill, Inc., a
nonhazardous waste disposal facility. In January 1990, the Company acquired
AWMS, Inc., a hazardous and nonhazardous waste brokerage and management
business; Envirco Transportation, Inc., a hazardous and nonhazardous waste
transporter; Envirco Transportation Management, Inc., a waste transportation
brokerage and management business; and DartAmericA, Inc., a hazardous and
nonhazardous waste transporter and common carrier.

In October 1990 the Company acquired its environmental consulting, laboratory
and remediation companies: Earth Sciences Consultants, Inc., Antech Ltd., and
AWS Remediation, Inc. (formerly known as CRS, Inc.). These technical
environmental firms are referred to collectively as the "Earth Sciences
Companies."

In January 1992, following the Ohio EPA's approval, the acquisition of
Mahoning Landfill, Inc. ("MLI"), a nonhazardous solid waste disposal facility,
was consummated. Since January 1990, the Company had managed the facility
pending approval by the Ohio EPA of the transfer of ownership.

In March 1993, the Company through East Liverpool Landfill, Inc. ("ELLI")
acquired the East Liverpool landfill, a nonhazardous solid waste disposal
facility, from the City of East Liverpool, Ohio (the "City"). Since February
1990, ELLI had operated the East Liverpool landfill pending approval by the Ohio
EPA of the transfer of ownership and issuance of a Permit To Install ("PTI").

The Company's primary business segment provides integrated waste management
and environmental services, including disposal, collection, technical,
transportation and disposal brokerage and management services, to industrial,
commercial, municipal and governmental customers primarily in selected eastern
and midwestern U. S. markets. The Company's principal activities include the
operation of nonhazardous solid waste landfills in Ohio for the disposal of
special waste and municipal solid waste; transportation of hazardous and
nonhazardous waste; transportation and disposal brokerage and management
services; collection services; and environmental engineering, site assessment,
analytical laboratory and remediation services. The Company, as part of its
transportation business, also operates a second business segment: a common
carrier of general and bulk commodities within the United States and several
provinces of Canada. See "Business Segment Information" on page 23 of Annual
Report to Shareholders, which is incorporated herein by reference, for financial
information relating to business segments.

Waste Disposal Services
- -----------------------

It is the Company's policy to make its landfills available, on a priority
basis: first, for waste generated by the local communities in which its
landfills are located; and second, for the state's disposal needs. Any
remaining capacity is utilized for out-of-state waste. The Company believes
this policy has enabled it to maintain good relations with the communities in
which its landfills operate and governmental authorities. During 1996, 1995,
and 1994 approximately 78%, 66% and 65%, respectively, of the waste received by
its landfills was generated in the State of Ohio.

The Company's landfills accept municipal solid waste and special waste for
disposal. Special waste is waste material that is neither refuse nor garbage,
nor hazardous waste. Special waste includes continuously generated material
such as nonhazardous industrial waste products (including those produced by air
and water pollution control processes), combustion ashes, and industrial and
municipal sludges. The

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Company also considers material removed from a site as part of a remediation
project (such as asbestos or soils contaminated with petroleum or certain other
chemicals), tires and demolition debris as special waste. Special waste does not
require the extensive and costly treatment and sealed containment required for
hazardous waste. Proper transportation, treatment and disposal of special waste
does, however, require the technical expertise to determine that the material is
in fact nonhazardous, because the failure to accurately identify the waste can
expose the generator and the waste disposal facility to substantial liability.
The Company relies on its management and other key personnel, with their
professional and technical backgrounds, in both the nonhazardous and hazardous
waste industry, to provide this technical expertise.

Facilities

The Company, through wholly owned subsidiaries, owns three nonhazardous solid
waste disposal facilities in Ohio operated by American Landfill, Inc. ("ALI"),
Mahoning Landfill, Inc. ("MLI"), and East Liverpool Landfill, Inc. ("ELLI"). ALI
also owns and operates the Company's tire monofill and the Company's liquid
solidification facility which has the capacity to accept and properly solidify
in excess of 50,000 gallons per day of nonhazardous liquid wastes. Following is
information as to the location, approximate total property acres, permitted
facility acres and currently permitted daily waste receipt limits of the
Company's disposal facilities.

<TABLE>
<CAPTION>
Total Permitted Permitted Daily
Property Facility Waste
Landfill Location Acres Acres Receipt Limit
-------- -------- -------- --------- ---------------

<S> <C> <C> <C> <C>
American Landfill Waynesburg, Ohio 870 510 8,000 tons
Tire Monofill Waynesburg, Ohio 80 80 492 tons
Mahoning Landfill New Springfield, Ohio 200 120 2,500 tons
East Liverpool Landfill East Liverpool, Ohio 200 150 1,500 tons
</TABLE>

In May 1996, ALI received an expansion permit that increased the disposal
capacity of the landfill to approximately 23 million cubic gross air yards,
thereby significantly increasing the life of the landfill. During 1996, 1995
and 1994 ALI operated, on average, at approximately 52%, 50% and 52%,
respectively, of its permitted daily waste receipt limit. Municipal solid waste
represented approximately 60%, 54% and 56%, respectively, and special waste
represented approximately 40%, 46% and 44%, respectively, of the total volume of
waste disposed of at ALI during 1996, 1995 and 1994.

Under Ohio law and related regulations, whole scrap tires as well as shredded
scrap tires are no longer permitted to be disposed of in sanitary landfills. In
August of 1992, the Ohio EPA issued to ALI, Ohio's first PTI for a tire
monofill. ALI, which acquired tire shredding and related equipment, began
operating the tire monofill in January 1995. The tire monofill, which is
located adjacent to the American landfill, has a permitted daily capacity of 492
tons and is expected to have the capacity to dispose in excess of 75 million
shredded tires.

The Company completed construction of a landfill gas extraction facility at
its American landfill and began production in September 1996. The production
and sale of the landfill gas is expected to entitle the Company to quality for
tax credits from the production of fuel from a nonconventional source.

On March 1, 1995, the Company received a final Permit to Install ("PTI") from
the Ohio EPA to upgrade the Mahoning landfill facility to comply with "best
available technology" standards. The final PTI increased Mahoning Landfill,
Inc.'s daily waste receipts limit to 2,500 tons per day from 1,500 tons per day
and increased the Mahoning landfill's total capacity to approximately 10 million
cubic gross air yards. In 1994 MLI operated, on average, at approximately 49%
of its permitted daily waste receipt limit of 1,500 tons per day. In 1996 and
1995 MLI operated, on average, at approximately 21% and 20%, respectively, of
its permitted daily waste receipt limit of 2,500 tons per day.

In light of market conditions, regulatory requirements and other business
factors, in 1995 ELLI determined that the significant capital investment
necessary to develop the East Liverpool landfill facility in the foreseeable
future was not economically justified. Although this facility has permitted
capacity of

2
<PAGE>

approximately 13.7 million cubic gross air yards, as a result of the decision
not to further develop the facility in the foreseeable future, it has very
limited airspace currently available for waste disposal. The Company
significantly reduced the quantity of waste accepted for disposal commencing in
July 1996. In 1995 and 1994 the East Liverpool landfill operated, on average, at
approximately 28% and 32%, respectively, of its current permitted daily waste
receipt limit. Both municipal solid waste and special waste are disposed of at
the East Liverpool landfill.

The Company estimates that the remaining permitted disposal capacity of its
facilities is approximately 31.9 million cubic gross air yards. Such overall
disposal capacity does not include approximately 13.6 million cubic gross air
yards of permitted capacity at the Company's East Liverpool landfill which the
Company does not intend to develop in the foreseeable future. The relationship
of the compactability and weight of waste to the amount of air space utilized to
dispose of the waste can vary significantly between different categories of
waste which otherwise meet the Company's permits and disposal standards. As a
result, the actual volume of waste (measured in either cubic yards or tons) that
the Company is able to dispose of will depend upon the mix of waste accepted,
its weight and compactability, operating practices and the airspace utilized by
cover material. The Company does not have any guidelines respecting acceptance
of waste based upon compactability and accepts all categories of waste which
otherwise meet its permit and disposal standards.

Waste Disposal Operations
- -------------------------

The Company's landfill customers are charged a tipping fee for the waste
disposed of at the facility. The volume of waste received by the Company's
landfills is somewhat seasonal with generally greater amounts of waste received
in the warmer months. Additionally, the volume of waste received by the
Company's landfills is somewhat dependent on general economic conditions.
Restrictions or impediments (including increased governmental fees) on the
acceptance of waste could adversely affect the Company's disposal revenues.

Waste Monitoring. Because waste generators remain liable for their waste both
before and after disposal, they require assurances that their waste will be
safely and properly transported, treated and disposed. To give customers this
confidence, as well as to limit its own potential liability, the Company has
instituted procedures designed to minimize the risks of improper handling or
disposal of waste.

Prior to acceptance of special waste for disposal, a potential customer must
complete a detailed questionnaire setting forth the amount, chemical
composition and any special characteristics for each separate waste to be
disposed in a Company landfill. Representative samples of the waste are
analyzed by a laboratory selected from a Company-approved list of state or
federally certified laboratories. In some cases, additional samples will be
taken for analysis by the Company. In addition, a Company representative
generally inspects the process generating the waste, the location where the
waste may be temporarily stored or the site of the remediation project producing
the waste, and interviews representatives of the generator familiar with the
waste. This inspection, along with the laboratory results, allows the Company
to determine whether the waste is within acceptable parameters for disposal in
its facilities, and if so, what special handling and treatment procedures must
be instituted. If the waste is continuously generated, new representative
samples are tested on a periodic basis.

These procedures are important to both the Company and its customers since the
key to proper handling of special waste is accurate identification. Hazardous
waste which is not identified as such and thus improperly disposed can result in
substantial liability to the waste generator and the disposal facility, and
potentially to all other waste generators that have used the disposal site.
Conversely, waste that could safely and legally be disposed of in a solid waste
landfill but is instead sent to a hazardous waste facility for treatment and
disposal will result in substantial and unnecessary expense to the generator.

If the waste is identified as hazardous or requires special treatment that the
Company is unable to provide, or contains levels of any of a large list of toxic
or otherwise dangerous chemicals that the Company has determined are
unacceptable for its facilities, the Company will not accept the waste for
disposal at its facilities. American Waste Management Services, Inc. ("AWMS"),
the Company's waste disposal brokerage subsidiary, can assist customers to
direct wastes to alternative, approved treatment and disposal sites if those
wastes cannot be accepted into a Company facility. Additionally, even if a
waste is within acceptable parameters for disposal at its landfills, the
Company's brokerage operations may direct the waste to an unaffiliated site
better suited to a customer's location.

3
<PAGE>

The Company manages the transportation of substantially all special waste
accepted for disposal in its facilities, by utilizing either the Company's
transportation equipment or Company-approved carriers. See Item 1.
"Transportation Services." Managing the transportation ensures the integrity
and reliability of the transporter, verifies the type of waste loaded for
delivery and regulates the flow of trucks into the landfills. The Company
assigns a waste identification number to each special waste accepted for
disposal in one of its facilities, and provides the customer with preprinted
transportation manifests bearing such number. Each transportation manifest
provides for certification by the waste generator that the waste delivered to
the carrier conforms to the waste previously approved for disposal. The
manifest is also signed by the carrier upon pickup and by the landfill upon
delivery, and a signed copy is returned to the customer. Accordingly, each
truckload of special waste can be traced from waste generator to disposal at the
landfill, and the customer can be assured that its waste has been properly
transported and disposed.

At the landfills, the Company's employees visually inspect each truckload of
special waste for any nonconformity with the waste identified by the waste
number appearing on the manifest. In addition, periodic testing and analysis of
waste on a random basis is performed. If it appears that the material in the
truck does not conform to the specifications of the approved waste or is
unacceptable for any other reason, the Company will not accept the waste for
disposal.

Residential and commercial garbage and refuse is delivered to the landfills
for disposal either directly after collection, or in certain cases, from
regional transfer stations. In addition, individuals will occasionally bring
small loads of garbage or refuse to the facilities. Employees of the Company
visually inspect all garbage and refuse at the landfill for any irregularities
which would warrant further investigation or rejection.

Cell preparation; Waste Disposal; Cell Closure. The Company disposes of
special waste and municipal solid waste at its landfill facilities in a series
of "cells", which it prepares by excavating earth to a layer of naturally
present clay. This clay is highly impermeable and thus prevents liquids from
seeping through the base of the landfill and mixing with the groundwater.
ALI's, MLI's and ELLI's permits, as well as The United States Environmental
Protection Agency's "Subtitle (D) Regulations," require the use of a composite
liner system consisting of clay and synthetic materials and a leachate
collection system in connection with the construction of new cells where no
previous waste placement activities have occurred. Cell preparation procedures
at the Company's disposal facilities shall comply with such requirements and
their respective permits.

The Company's employees direct trucks to deposit their waste at the "working
face" of the currently operating cell where the waste is again inspected prior
to special equipment spreading and compacting the deposited material into the
cell. Most special waste and municipal solid waste is deposited upon its
arrival at the landfill into the presently operating cell. Certain wastes,
however, require special treatment and/or segregated disposal. For example,
Ohio law prohibits solid waste landfills from accepting waste containing free
liquids. ALI operates a solidification facility, under a special permit from
the Ohio EPA, which solidifies liquid waste so that it can then be disposed of
in the landfill. In addition, ALI currently operates, under a special permit
from the Ohio EPA, single purpose cells for sealed containers of asbestos, which
are disposed of using special procedures to avoid the release of fibers.

At the end of each day, the Company covers the waste deposited in each cell
with either a layer of earthen material, which applicable regulations require be
at least six inches thick, or an approved synthetic daily cover. Use of
synthetic daily cover provides more efficient utilization of disposal capacity.
Once a portion of a landfill reaches its permitted capacity, or is otherwise
closed, it is covered with clay, synthetic material, topsoil, other earthen
materials and vegetation in accordance with applicable permits, licenses and
regulations.

In 1994, the Director of the Ohio EPA promulgated rules restricting the
disposal of yard waste in sanitary landfills. In order to continue to provide
yard waste management services to our customers, the Company operates a Class IV
yard waste composting facility at its American landfill and has instituted yard
waste restriction programs at all three landfill facilities.

4
<PAGE>

technology" with respect to cell preparation and lining, leachate collection and
treatment, and groundwater monitoring as well as to provide financial assurances
adequate to cover closure costs and post-closure monitoring costs for a period
of up to 30 years after the landfill is closed. The Company estimates that such
upgrading, which will be implemented over the life of the landfills as the
Company closes presently operating cells and prepares new ones for use, will
increase the expense of cell preparation to approximately $200,000-$300,000 per
acre. The Company presently performs groundwater monitoring at all of its
landfills in compliance with applicable law and regulations and requirements of
regulatory agencies. See Item 1. "Environmental Regulations."

Transportation Services
- -----------------------

General

The Company transports waste and other products on behalf of customers within
the United States and portions of Canada, and provides transportation brokerage
and management services. The Company's transportation operations have the
equipment and the expertise to transport virtually all types of waste and
commodity products. In addition the Company provides intermodal transportation
services.

The Company estimates that approximately 7%, 7% and 10% of the net operating
revenue of the integrated waste management and environmental services segment
involved hauling waste to the Company's landfills during 1996, 1995 and 1994,
respectively. The Company also transports hazardous waste to waste treatment
and disposal facilities owned by third parties. In providing this service, the
Company utilizes a variety of trucks, dump trailers, tankers and other equipment
specially designed and constructed to transport hazardous waste. All drivers
engaged in the transportation of hazardous waste for the Company have completed
all training mandated by applicable governmental regulations. Each driver also
attends safety meetings on approximately a quarterly basis and each possesses
all required governmental certificates. The transportation of hazardous waste
represented approximately 20%, 22% and 19% of the net operating revenue of the
integrated waste management and environmental services business segment in 1996,
1995 and 1994, respectively. Carriers of hazardous waste can be held
responsible under environmental laws and regulations for improper handling of
such waste. See Item 1. "Environmental Regulations."

As is the case with any transportation company, an increase in fuel prices may
subject the Company to increased operating expenses, which the Company may not
be able to pass on to its customers. Restrictions or impediments to the
interstate transportation of waste or the acceptance of out-of-state waste for
disposal at the Company's landfills could adversely affect the Company's
transportation revenues.

DartAmericA, Inc. ("Dart")

Through Dart and its subsidiaries, the Company is engaged in the
transportation of waste and is a common carrier of both general and bulk
commodities. Dart, which commenced operations in 1965, also engages in the
brokerage of transportation.

Dart is a fully licensed hazardous and nonhazardous waste carrier.
Approximately 59%, 62% and 63% of the revenue generated by Dart in 1996, 1995
and 1994, respectively, related to the transportation of waste. Hazardous waste
represented 66%, 66% and 65% of Dart's waste transportation revenues in 1996,
1995 and 1994, respectively.

5
<PAGE>

Dart, which is licensed as a common carrier in 49 states and several provinces
of Canada, derived 41%, 38%, and 37% of its revenues in 1996, 1995 and 1994,
respectively, from the transportation of bulk commodities, such as coal, salt,
sand and ash, as well as steel products and heavy machinery. A common carrier
engaged in the transportation of goods owned by others is subject to federal and
state regulations which establish operating and safety standards. Carriers are
liable for loss of or damage to goods entrusted to their care. Public liability
and property damage insurance is compulsory.

A majority of the truck power units, and a substantial number of the trailers,
used by Dart are owned and operated by independent truckers who receive a
negotiated percentage of the gross revenue from the carriage. Most of the
approximately 125-150 independent truckers who provide services for Dart have
been doing so for a number of years. These independent truckers pay for fuel
and all other expenses with the exception of insurance, hazardous waste permits,
special equipment required to carry hazardous waste and other safety equipment,
all of which are provided by Dart. Equipment used by the independent truckers
is inspected at least annually and is subject to random inspections by Dart.
See Item 2. "Properties."

Dart leases roll-off containers to customers which fill the containers with
waste as it is generated. Using specially designed trailers, Dart periodically
picks up and replaces the containers, which it transports to the Company's
landfills or other approved facilities for disposal. As is the case with any
waste accepted for disposal at a Company facility, the Company carefully
monitors the waste deposited in the roll-off containers. See Item 1. "Waste
Disposal Operations." All hazardous waste is transported by roll-off trailers,
specialized tanker, van, dump or flatbed trailers to treatment and disposal
facilities owned by third parties. See Item 2. "Properties."

Envirco Transportation, Inc. ("ETI")

The Company's subsidiary, ETI, commenced its waste transportation operations
in 1981. During 1994, ETI ceased operations. ETI was a fully licensed,
specialized hazardous and nonhazardous waste transporter operating primarily in
the regional markets of Ohio, Pennsylvania, West Virginia, Illinois, Kentucky,
Michigan, and Indiana.

For the year 1994 approximately 31% of ETI's transportation revenues related
to waste classified as hazardous. The revenues related to special waste
approximated 69%.

Envirco Transportation Management, Inc. ("ETMI")

ETMI provides waste transportation brokerage and management services to a
variety of customers. ETMI's operations are primarily engaged in securing
transportation, through Dart or otherwise, for special waste destined for the
Company's landfills. ETMI also arranges transportation of waste to other
disposal sites which are better suited to the customer's location or which are
equipped to accept and treat hazardous waste or other waste that the Company's
landfills do not accept. The Company maintains lists of approved transporters,
which it periodically reviews and updates, and the Company will only engage
transporters that it believes are reliable and efficient in providing the
services required in accordance with the Company's standards.

Collection Services
- -------------------

During the third quarter of 1996, the Company, through newly organized
subsidiaries, American Waste, Inc., American Waste of Mahoning Valley, Inc., and
America Waste of Northeast Ohio, Inc., started commercial collection operations
with the intent to begin residential collection in the future. The Company
initially intends to target local markets in which the Company's American and
Mahoning landfills are located. The Company expects its collection operations
to provide its disposal facilities with municipal solid waste which the
Company's landfills may not otherwise receive.

Consulting, Analytical and Remedial Services
- --------------------------------------------

The Earth Sciences Companies provide a wide range of technical environmental
services including environmental impact studies, landfill design, permitting,
site assessments, waste management and minimization consulting, laboratory
services, environmental site remediation and environmentally related

6
<PAGE>

construction activities including removal of underground storage tanks,
remediating Superfund sites and conducting landfill closure and decommissioning.
These companies also provide hazardous and nonhazardous waste management,
groundwater remediation, and underground storage tank management. The Earth
Sciences Companies are often engaged to perform a remedial
investigation/feasibility study ("RI/FS"), which first entails performing a site
assessment involving the gathering of samples from the contaminated site,
followed by laboratory analysis to establish or verify the nature and extent of
the contaminants. Alternative solutions to remedy the particular problem are
then developed, evaluated and presented to the client. The Earth Sciences
Companies are equipped to implement the mitigation and decontamination program
then selected by the client and approved by the appropriate regulatory agency.
In implementing such a program, the Earth Sciences Companies may employ the
Company's transportation, disposal and/or brokerage services. The Earth Sciences
Companies also possess the expertise to perform the evaluation and analysis
necessary to advise clients respecting compliance with federal and state
environmental regulations, and have assisted clients in developing waste
management and compliance policies, including the development of plans for waste
minimization and disposal. The Earth Sciences Companies also provide services
related to evaluation of the environmental condition of real estate for law
firms, banks or potential purchasers.

The Earth Sciences Companies also provide comprehensive organic, inorganic and
radiochemical laboratory services including water and waste water analyses,
waste characterization, sludge, soil and rock analyses and related bench studies
for waste water treatment and process design.

The Earth Sciences Companies have extensive experience in siting, designing,
constructing, monitoring and performing closure of landfills. As a result, the
Company has utilized the Earth Sciences Companies to expand the permitted
capacity of its landfills, to obtain permits for the design and development of
new sites by providing the required scientific, engineering and support
services.

The Earth Sciences Companies complement the Company's other operations in
several ways. A waste generator desiring to dispose of a waste in the Company's
landfills may obtain the required laboratory analysis of the waste from the
Earth Sciences Companies. In addition, consulting and remediation operations of
the Earth Sciences Companies can generate both transportation and disposal
business for the Company, because such projects frequently involve the removal
and disposal of a waste product. The Earth Sciences Companies can also assist
in the design, construction and maintenance of permitted on-site disposal
facilities for the Company's customers.

In 1996, 1995 and 1994, the Earth Sciences Companies derived approximately
96%, 95% and 90%, respectively, of their revenues from environmental
assessments, RI/FS's, industrial consulting, site remediation and other
laboratory analyses services, and 4%, 5% and 10%, respectively, from consulting
work in the solid waste disposal area. The Earth Sciences Companies obtained
approximately 4%, 5%, and 7% of their revenues from the Company in 1996, 1995
and 1994, respectively.

Avalon Lakes
- ------------

In June 1990, the Company purchased approximately 5.6 acres of real estate
located in Howland Township, Ohio, on which it constructed a 26,000 square foot
office building to serve as its corporate headquarters. In connection with the
acquisition of such property, the Company's subsidiary, Avalon Lakes Golf, Inc.
("ALGI"), acquired the real and personal property associated with the Avalon
Lakes Golf Course, an 18-hole public golf course adjacent to the office
property. See Item 2. "Properties."

Environmental Regulations
- -------------------------

General

The Company is subject to extensive and evolving environmental laws and
regulations that have been enacted in response to technological advances and the
public's increased concern over environmental issues. These regulations are
administered by the U. S. Environmental Protection Agency (the "EPA"), the Ohio
EPA, and various other federal, state and local environmental, zoning, health
and safety agencies, many of which periodically examine the Company's operations
to monitor compliance with such laws and regulations. The Company believes it
is currently in substantial compliance with applicable

7
<PAGE>

federal, state and local laws and regulations. Furthermore, the Company believes
there will be increased regulation and legislation related to the waste
management industry.

The federal government as well as numerous states and local governmental
bodies are increasingly considering, proposing or enacting legislation to either
restrict or impede the disposal and/or transportation of waste. A significant
portion of the Company's disposal and transportation revenues are derived from
the disposal or transportation of out-of-state waste. All of the Company's
landfills are located within the State of Ohio. Any regulation restricting or
impeding the transportation of waste, the acceptance of out-of-state waste for
disposal at any of the Company's landfills, or which levies significant taxes or
fees on the disposal of waste could have a significant negative effect on the
Company. The Company's landfill and transportation operations may also be
affected by the trend toward laws requiring the development of waste reduction
and recycling or other programs, although the Company does not expect recycling
programs to have a great impact on special waste disposal.

In order to operate a landfill, the Company must possess and maintain one or
more operating permits and licenses and, in certain instances, applicable
regulatory approvals. Obtaining the necessary permits and approvals in
connection with the acquisition, development or expansion of a landfill is
difficult, time-consuming and expensive, and is frequently opposed by local
citizen groups. Once obtained, operating permits are subject to modification
and revocation by the issuing agency. The Company's landfill operations are
also subject to evolving and expanding operational, monitoring, site maintenance
and closure and post-closure requirements.

In order to transport hazardous waste and, in certain cases, special waste,
the Company must possess and maintain one or more state operating permits.
These operating permits must be renewed annually and are subject to modification
and revocation by the issuing agency. In addition, the Company's waste
transportation operations are subject to evolving and expanding operational,
monitoring and safety requirements.

In the ordinary course of its disposal and transportation operations, the
Company may from time to time receive citations, notices or comments from
regulatory authorities that such operations are not in compliance with
applicable environmental regulations. These agencies may seek to impose fines
on the Company or to revoke or deny renewal of the Company's operating permits
or licenses, or to require the Company to remediate environmental problems at
its sites relating to waste disposed of by the Company or its predecessors, or
resulting from its transportation operations. Upon receipt of such citations,
notices or comments, the Company works with the authorities in an attempt to
resolve the issues raised. Failure to correct the problems to the satisfaction
of the authorities could lead to fines or a curtailment or cessation of such
operations.

As a result of participating in the waste management industry, many of the
Company's capital and other expenditures relate to compliance with existing, and
in some cases, proposed environmental laws and regulations. Compliance with
future environmental laws and regulations may require the Company, together with
others in the waste management industry, to make significant capital and
operating expenditures. There can be no assurance that the Company would be
able to recover all such expenditures from its customers or that its earnings or
competitive position would not be materially and adversely affected. See Item
1. "Waste Disposal Services - Facilities" and "Cell Preparation; Waste
Disposal; Cell Closure."

Statutes

The following are the principal statutes affecting the Company's business:

The Ohio Solid Waste Law (the "Ohio SW Law"). In June 1988, the Ohio
legislature enacted the Ohio SW Law (often referred to as House Bill 592 and
codified as Ohio Revised Code Chapter 3734) in response to a perceived solid
waste disposal crisis facing the State of Ohio. Although hazardous waste and
municipal solid waste have been subject to state and/or federal regulation for
over two decades, House Bill 592 was the first comprehensive measure by the
State of Ohio respecting the waste industry. The Ohio SW Law enables the Ohio
EPA, through the Ohio Attorney General, to conduct criminal investigations and
background checks of officers, directors and owners of solid waste management
companies, which are required for landfill permits and for transfer of ownership
of landfills.

8
<PAGE>

The Ohio SW Law and the regulations promulgated thereunder, require landfill
operators to employ the "best available technology" in their daily operations
and to submit annual reports to the Ohio EPA respecting operations and
procedures. These regulations also require landfills to upgrade their cell
preparation and closure and post-closure procedures with the "best available
technology" in accordance with plans which must be submitted to, and approved
by, the Ohio EPA in accordance with specified schedules. These plans must
provide for landfill cell liners consisting of at least five feet of highly
impermeable clay (which must be recompacted) and a layer of synthetic material,
as well as a leachate collection system designed to remove, for treatment or
disposal, any water which collects on the top of the landfill liners. Upon
approval, the upgrading will be implemented over the life of the landfills as
current cells are closed and additional cells are prepared for use. The
regulations do not require previously filled areas to meet all "best available
technology" requirements. The Ohio SW Law also requires landfill operators to
meet and maintain certain net worth and financial tests, to post bonds or make
similar financial assurance arrangements, or to deposit sufficient funds into a
state approved trust account, during the operation of the landfill to assure
that adequate resources will be available for cell-closure and post-closure
monitoring. See Item 1. "Waste Disposal Services."

The Ohio SW Law and the regulations promulgated thereunder authorize the
formation of local solid waste management districts to further regulate the
disposal of solid waste. Certain categories of applications for PTIs must be
reviewed and approved by the district prior to submission to the Ohio EPA.
Subject to the provisions of the Ohio SW Law, districts are authorized (i) to
prevent the disposal of wastes generated within such district at facilities that
are not designated by such district in accordance with the Ohio SW Law and, (ii)
prevent disposal facilities located within the district and designated by such
district from accepting for disposal wastes generated outside of the district.
If districts were to successfully exercise such authority, the result could have
a material adverse effect on the business of the Company. Each district also
has the authority to impose a fee on waste deposited in landfills located within
its boundaries. These solid waste management district fees are currently
limited to a maximum of $4.00 per ton for wastes generated outside of the
district but within Ohio and $2.00 per ton for waste generated within the
district or outside of Ohio. The districts are also empowered to impose a fee
on the generation of waste within such district. The Ohio SW Law also
authorizes the State of Ohio to collect a fee on waste disposed of in an Ohio
landfill at the present rate of $1.75 per ton. Municipal corporations or
townships in which landfills are located are authorized to collect an additional
$.25 per ton. The Company is obligated to pay these governmental fees which
have been imposed on its facilities whether or not it collects such fees from
its customers.

Ohio Senate Bill 165, passed by the Ohio legislature in October 1993, required
the Ohio EPA to promulgate rules governing storage, collection, transportation
and disposal of scrap tires. The Ohio EPA promulgated rules effective March 1,
1996 relating to such legislation. Whole scrap tires as well as shredded scrap
tires are no longer permitted to be disposed of in sanitary landfills.

The Resource Conservation and Recovery Act of 1976 ("RCRA"). RCRA regulates
the handling, transportation and disposal of hazardous and nonhazardous waste
and requires states to develop programs to insure the safe disposal of solid
waste in sanitary landfills, which programs will require special waste to be
disposed of off-site to a greater degree than in the past. In October 1991 the
EPA promulgated subtitle D of RCRA ("Subtitle D"), and announced the
Comprehensive Solid Waste Management Guidelines, which include location
standards, facility design, operating criteria, closure and post-closure
requirements, financial assurance standards and groundwater monitoring as well
as corrective action standards, many of which have not commonly been in place or
enforced at landfills. On October 9, 1993 Subtitle D became effective and
states are required to revise their landfill regulations to meet these
requirements in order to obtain authorization to enforce the provisions of
Subtitle D. Ohio has revised its regulations and is currently so authorized.
Because some parts of the new regulations will be phased in over time, the full
effect may not be apparent for several years. Regulations currently in effect
pursuant to the Ohio SW Law include, in many cases, stricter standards and
requirements for solid waste landfills such as those operated by the Company
than required by Subtitle D. Several bills have been proposed or introduced
into Congress relating to the "Reauthorization of RCRA." Such bills vary in
scope and nature with several addressing the transportation and disposal of out-
of-state waste. The Company is presently unable to determine what legislation,
if any, will ultimately result with respect to the "Reauthorization of RCRA."

9
<PAGE>

The following summarizes certain other environmental statutes affecting the
business of the Company:

The Federal Water Pollution Control Act (the "Clean Water Act"). The Clean
Water Act established rules regulating the discharge of pollutants from a
variety of sources, including solid waste disposal sites, into streams or other
surface waters. Should runoff or collected leachate from the Company's
landfills be discharged into surface waters, the Clean Water Act would require
the Company to apply for and obtain discharge permits, conduct sampling and
monitoring and, under certain circumstances, reduce the quantity of pollutants
in those discharges.

The Comprehensive Environmental Response, Compensation, and Liability Act of
1980 ("Superfund" or "CERCLA"). CERCLA addresses problems created by the
release of any hazardous substance into the environment. CERCLA's primary
mechanism for remediating such problems is to impose strict joint and several
liability for cleanup of disposal sites among all past and current owners and
operators of the site as well as the waste generators and the transporters. The
costs of CERCLA cleanup can be very substantial. Liability under CERCLA does
not depend upon the existence or disposal of "hazardous wastes" but can also be
founded upon the existence of even very small amounts of the more than 700
"hazardous substances" listed by the EPA. See Item 3. "Legal Proceedings."

The Clean Air Act, as amended (the "Clean Air Act"). The Clean Air Act
provides for federal, state and local regulation of the emission of air
pollutants and has been construed by the EPA to apply to landfills. The 1990
amendments to the Clean Air Act focused on reducing acid rain pollutants and
urban smog and eliminating most toxic chemical emissions from industrial plants
by the year 2000. The EPA has developed air emission guidelines for solid waste
landfills. These rules govern emissions on non-methane organic compounds and
methane and were proposed on May 30, 1991.

State Regulation. In addition to federal laws and regulations, each state in
which the Company now operates, or may operate in the future, has laws and
regulations governing handling, transportation and disposal of waste, water and
air pollution and, in most cases, the design, operation, maintenance, closure
and post-closure maintenance of landfills.

Sales and Marketing
- -------------------

The Company's sales and marketing strategy continues to focus upon the cross-
selling of each of the integrated waste management and environmental services
provided by the Company. The Company's sales force is familiar with the various
environmental services offered by the Company and directs his or her efforts
toward selling an integrated waste management package to potential customers.
As part of the start-up of its collection operations, the Company has
established a separate sales force which primarily focuses on commercial
municipal solid waste collection opportunities.

Competition
- -----------

The nonhazardous solid waste management business is highly competitive and
fragmented. The industry is characterized by several large national waste
management companies as well as numerous local and regional companies of varying
sizes and financial resources. The Company competes for business primarily by
providing a full range of quality waste management and environmental services
at a competitive price.

Competition among landfills is based upon price, service and the proximity of
the landfill to the waste generator. The Company focuses on the special waste
segment of the industry, in addition to the disposal of municipal solid waste.
Competitors previously engaged primarily in the collection and disposal of
municipal solid waste and/or disposal of hazardous waste have significantly
increased their presence in the special waste market. Competition may also be
affected by the increasing national emphasis on recycling, composting,
incineration and other waste reduction programs or any legislation restricting
or impeding the transportation and/or disposal of waste, or imposing significant
taxes or governmental fees on disposal of waste.

The Company is subject to extensive and evolving environmental laws and
regulations that have been enacted in response to technological advances and the
public's increased concern over environmental

10
<PAGE>

issues. As a result, the Company believes that costs associated with the
engineering, construction, ownership and operation of landfills will increase in
the future. Competitive factors may require the Company to absorb all or a
portion of these increased expenses.

Competitive pressures with regard to disposal services have intensified in
recent years. Increases in additional disposal capacity within the industry and
aggressive pricing strategies of certain competitors could result in further
softening of disposal rates and a decline in disposal volumes.

The markets for the transportation of hazardous and nonhazardous waste and for
the transportation of general and bulk commodities are each highly competitive.
There are numerous participants, and no one transporter has a dominant market
share. The Company competes primarily with other short and long-haul carriers
for both truckload and less than truckload shipments. Competition for the
transportation of waste is based not only on the ability of the carrier to
transport the waste at a competitive price, but also in accordance with
applicable regulations and the latest advances in technology. Access to
disposal capacity assists the Company in competing for waste transportation
business. Competition for the transportation of commodities is based primarily
on price and service.

The Earth Sciences Companies compete with numerous large and small companies,
each of which is able to provide one or more of the environmental services
offered by the Earth Sciences Companies and some of which have greater financial
resources. The Earth Sciences Companies attempt to develop relationships with
clients who have an ongoing need for their integrated technical environmental
services. The availability of skilled technical personnel, quality of
performance, and service are the key competitive factors in developing such
relationships.

Competition for collection services is based upon price and customer service.
The Company's collection operations compete with numerous national and local
companies, each of which is able to provide the services offered by the Company.
Many commercial collection customers have entered into multi-year service
agreements, most of which provide for automatic renewals absent notice of
termination by the customer. These agreements have the effect of impeding new
collection companies from obtaining customers. As such, the Company anticipates
that significant growth of its commercial collection operations could take a
number of years.

Insurance
- ---------

The Company carries $21 million of comprehensive general liability insurance
coverage for the Company and its subsidiaries (other than with respect to ALGI,
which has separate insurance). This policy includes coverage for automobile
liability (including a pollution liability endorsement which covers certain
liabilities from its spills), comprehensive property damage, and other customary
coverage. Dart self-insures collision risks. The Earth Sciences Companies also
maintain professional and pollution legal liability coverage.

The Company may be subject to liability for any off-site environmental damage
its landfills may cause, particularly as a result of the contamination of
drinking water sources or the soil, including damage resulting from conditions
existing prior to the acquisition of the landfills by the Company. The Company
may also be subject to liability for any off-site environmental contamination
caused by pollutants whose transportation, treatment, or disposal was arranged
for by the Company or its predecessors. The Company carries an environmental
impairment liability insurance policy covering liability, on a claims made and
reported basis, of up to $3 million per occurrence ($6 million in the
aggregate), respecting certain off-site environmental damage from its American
landfill operations. The policy does not cover losses arising from conditions
in existence prior to the inception of the policy. No assurance can be given
that such insurance will be available in the future or, if available, that the
premiums will be reasonable.

If the Company were to incur a substantial liability for damages not covered
by insurance or substantially in excess of its policy limits, or at a time when
it no longer was able to obtain liability insurance, its consolidated financial
condition could be materially adversely affected.

The Company has entered into several contracts with governmental authorities
for a variety of environmental services. Typically, such contracts require
surety bonds or other financial instruments to

11
<PAGE>

assure performance under the terms of a contract. The Company has obtained in
the past, and expects to be able to obtain in the future, such bonds or other
financial instruments.

Employees
- ---------

As of December 31, 1996, the Company had 503 employees, 54 of whom were
employed in waste disposal, 151 of whom were employed in transportation, 149 of
whom were employed in environmental consulting, analytical and remedial
services, 20 of whom were employed in collection services, 65 of whom were
employed in corporate sales and marketing, financial and other corporate
activities and 64 of whom were employed by ALGI in the operation of the golf
course and restaurant. The Company believes that it has a good relationship
with its employees.

Other Business Factors
- ----------------------

None of the Company's business segments is materially dependent on patents,
trademarks, licenses, franchises or concessions held other than permits,
licenses and approvals issued by regulatory agencies. In addition, none of the
Company's business segments is materially dependent upon a single customer or a
few customers. See "Business Segment Information" on page 23 of the Annual
Report to Shareholders, which is incorporated herein by reference, for financial
information relating to business segments. The Company does not sponsor
significant research and development activities.

ITEM 2. PROPERTIES

The principal fixed assets of the Company's waste disposal operations consist
of land and land improvements (primarily disposal site and disposal site
improvements) in addition to landfill operating equipment. The Company also
owns a landfill gas extraction facility at its American landfill. The Company's
principal real estate is its interest in the landfills described under Item 1.
"Business - Waste Disposal Services." ALI owns approximately 950 acres of real
property on which it operates. MLI owns the 200 acres of real property on which
its facility is located. ELLI owns the 200 acres of real property on which the
East Liverpool landfill is located. The landfill operations use approximately
43 pieces of major equipment (such as compactors, bulldozers, scrapers, tire
shredding equipment, rock crushing equipment and backhoes), substantially all of
which are owned by the Company. See Item 1. "Business - Waste Disposal
Services."

At December 31, 1996, the collection operations, which began providing
services in the third quarter of 1996, owns one container delivery truck, two
front-load collection trucks, and four roll-off trucks, in addition to several
hundred containers of various sizes and other related equipment.

The Company provides transportation services from locations in Canfield, Ohio
(Dart's headquarters); Oxford, Massachusetts (where Dart leases a 5,760 square
foot terminal); Toledo, Ohio (where Dart leases a 2,500 square foot terminal);
and Kenova, West Virginia (where Dart leases a 1,500 square foot terminal). At
December 31, 1996, the transportation operations owned a fleet of 54 power units
(in addition to 19 power units which are leased), 202 trailers (in addition to
28 trailers which are leased), and 610 roll-off and other containers. In
addition, 125-150 power units and 250-300 trailers owned by independent
owner/operators are available for use in Dart's operations. Certain
transportation equipment acquired during 1993 is subject to liens securing the
repayment of indebtedness incurred to purchase such equipment.

The Earth Sciences Companies own their main offices and laboratory facilities
located in a 48,000 square foot building in Export, Pennsylvania. The Earth
Sciences Companies lease office space of approximately 4,000 square feet in
Akron, Ohio; 2,500 square feet in Blue Bell, Pennsylvania, near Philadelphia;
and 4,400 square feet in Denver, Colorado. In addition, 13,000 square feet is
leased for field equipment and vehicle storage and dispatch in Murrysville,
Pennsylvania. The Earth Sciences Companies also own numerous pieces of
laboratory, field, computer and other equipment.

The Company owns a 26,000 square foot headquarters building located on
approximately 5.6 acres of property in Howland Township, Ohio. Adjacent to such
property is an 18-hole public golf course owned and operated by ALGI including a
maintenance and storage building of approximately 12,000 square feet, a pro shop
and restaurant building of approximately 10,400 square feet, and a banquet
facility of

12
<PAGE>

approximately 7,000 square feet. The golf course property together with the pro
shop, restaurant facility and banquet facility serve as collateral securing
repayment of indebtedness incurred to construct such facilities.

Generally, the Company's fixed assets are in good condition and are
satisfactory for the purposes for which they are intended.

ITEM 3. LEGAL PROCEEDINGS

On or about October 3, 1991, one shareholder owning 100 shares of stock
brought suit against the Company and others on behalf of himself and a purported
class of other shareholders in the United States District Court for the Southern
District of New York. The suit alleges that the Company, the signatories to the
registration statements filed with the Securities and Exchange Commission during
October 1990, and the Company's underwriters violated federal securities laws in
connection with the Company's public offering of six million shares of Class A
Common Stock in October 1990. Among other things, the suit alleges
misrepresentations and failure to disclose allegedly material information
concerning the nature of the Company's market; the size of the Company's market;
the Company's failure to disclose that its landfills were located within a 50-
mile radius of each other in Ohio, thus making the Company especially vulnerable
to local conditions and competition; the Company's failure to set forth the
present and imminent competition; and the Company's growth. The Plaintiff seeks
damages in an unspecified amount alleged to have arisen in part from the decline
in the price of the Company's stock following the public offering, and
rescission. The Court has not yet determined whether the suit will proceed as a
class action.

A timely Answer was filed on behalf of all defendants and a Motion to Transfer
Venue to the Northern District of Ohio was granted on June 10, 1992. A Motion
for an Undertaking for Costs Pursuant to Section 11(e) of The Securities Act of
1933 was filed in the Northern District of Ohio but denied by the Court. A
Motion to Dismiss the Complaint for failure to state a claim was filed February
1, 1994 on behalf of all defendants but was denied by the Court on August 29,
1994. As a result of the language contained in the Order, on September 29, 1994
a Motion to Limit the Scope of Plaintiffs' Requested Discovery was filed. That
motion was granted, and all proceedings have been stayed pending a decision on
all defendants' Motion for Summary Judgment filed on May 30, 1995. The Company
intends to vigorously defend the claims.

In September 1995, certain subsidiaries of the Company were informed that they
had been identified as potentially responsible parties by the Indiana Department
of Environmental Management ("IDEM") relating to a Fulton County, Indiana,
hazardous waste disposal facility which is subject to remedial action under
Indiana environmental laws. Such identification is based upon the subsidiaries
having been involved in the transportation of hazardous substances to the
facility. These transportation activities occurred prior to the acquisition of
such subsidiaries by the Company. IDEM is seeking to recover and/or allocate
past costs of approximately $1.0 million as well as future costs associated with
further site investigation and remediation activities, which costs could be
substantial. Although a large number of waste generators and other waste
transportation and disposal companies have also been identified as responsible
or potentially responsible parties, because the law assigns joint and several
liability among the responsible parties, any one of them, including the
Company's subsidiaries, could be assessed the entire cost of the remediation.
Currently, no remedy has been selected. As such, the extent of any liability of
any of the Company's subsidiaries is currently unknown.

When the Company concludes that it is probable that a liability has been
incurred, a provision is made in the Company's financial statements for the
Company's best estimate of the liability based on management's judgment and
experience, information available from regulatory agencies, and the number,
financial resources and relative degree of responsibility of other potentially
responsible parties who are jointly and severally liable for remediation of the
site as well as the typical allocation of costs among such parties. If a range
of possible outcomes is estimated and no amount within the range appears to be a
better estimate than any other, then the Company provides for the minimum amount
within the range, in accordance with generally accepted accounting principles.
As such, the Company accrued a liability of approximately $941,000 in the fourth
quarter of 1995 relating to this matter.

The Company's estimates are revised, as deemed necessary, as additional
information becomes known. While the measurement of environmental liabilities
is inherently difficult and the possibility

13
<PAGE>

remains that technological, regulatory or enforcement developments, the results
of environmental studies or other factors could materially alter the Company's
expectations at any time, the Company does not anticipate that the amount of any
such revisions will have a material adverse effect on operations or consolidated
financial position.

On March 21, 1996, Earth Sciences Consultants, Inc. ("Earth Sciences"), a
subsidiary of the Company, entered into a Professional Services Agreement (the
"PSA") with the S. W. Shattuck Chemical Company, Inc. ("Shattuck") wherein Earth
Sciences agreed to act as the remediation contractor for the Denver radium site,
operable unit VIII, which is owned by Shattuck and located in Denver, Colorado
(the "Project").

Earth Sciences' work on the Project is currently suspended as a result of a
Stop Work Order issued by the United States Environmental Protection Agency ("US
EPA") on January 22, 1997, due to the discovery of unanticipated, petroleum
contamination on the Project site. On February 14, 1997, Earth Sciences filed a
demand for arbitration against Shattuck with the Denver Regional Office of the
American Arbitration Association relating to the PSA. The demand for
arbitration claims, among other things: (i) that Shattuck is in default and has
materially breached its payment obligations to Earth Sciences by failing to pay
outstanding invoices; (ii) that Shattuck has summarily and wrongfully denied
requested change orders; and (iii) that Shattuck has anticipatorily breached
the PSA.

On March 11, 1997, Shattuck filed an Answering Statement and Counterclaims.
Shattuck has denied Earth Sciences' claims and has asserted several
counterclaims including allegations that Earth Sciences has failed to perform in
accordance with the PSA and that Earth Sciences has no right to stop its work on
the project regardless of Shattuck's actions by reason of the language of the
PSA. American Waste Services, Inc. ("AWS") was named as a third party respondent
to the arbitration proceeding because under the PSA, AWS guaranteed the
performance of Earth Sciences' obligations, including the payment of any and all
liabilities of Earth Sciences.

On March 21, 1997 Earth Sciences received a letter from Shattuck advising
Earth Sciences that the stop work order issued by the US EPA on January 22, 1997
had been lifted on March 20, 1997, and that Shattuck will be engaging another
contractor to complete the project.

A hearing date has not yet been set. Failure to resolve the pending dispute in
favor of the Company could have a material adverse effect on the Company's
future financial results.

In addition to the foregoing, in the ordinary course of the Company's
business, the Company's transportation and other subsidiaries may become subject
to claims for personal injury and property damage (for which the Company carries
automobile liability and general liability insurance), and the Company's waste
disposal subsidiaries may become subject to environmental liability claims and
involved in various judicial and administrative proceedings with federal, state
and local agencies as well as citizen groups, in connection with the permitting
of its landfills and alleged violations of such permits. At the present time,
the Company and certain of the Company's subsidiaries are named defendants in
several lawsuits arising from the ordinary course of their respective
businesses. Although the outcome of such lawsuits or other proceedings cannot
be predicted with certainty, the Company does not believe that any uninsured
ultimate liabilities, fines or penalties resulting from such lawsuits or
proceedings, alone or in the aggregate, would have a material adverse effect on
the consolidated financial condition of the Company. See Item 1. "Business -
Insurance."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during
the fourth quarter of 1996.

EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding executive officers is contained in Item 10 of Part III
of this report.

14
<PAGE>

PART II

Information with respect to the following items can be found on the indicated
pages of the Annual Report to Shareholders if not otherwise included herein.

<TABLE>
<CAPTION>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Page(s)
-------

<S> <C>
Common stock information...................................................................................................... 28

Dividend policy............................................................................................................... 28

ITEM 6. SELECTED FINANCIAL DATA

The information required by this item is included in the Digest of Financial Data
for the years 1992 through 1996 under the captions Net operating revenues,
Net income (loss), Net income (loss) per share, Total assets and Long-term debt.............................................. 25

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................................................... 2-9

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent auditors' opinion regarding financial statements as of
December 31, 1996 and 1995 and for each of the years in the three-year
period ended December 31, 1996............................................................................................... 24

Financial Statements:

Consolidated Balance Sheets, December 31, 1996 and 1995...................................................................... 10

Consolidated Statements of Operations for the years ended December 31, 1996,
1995 and 1994............................................................................................................... 11

Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994............................................................................................................... 12

Consolidated Statements of Shareholders' Equity for each of the years in the
three-year period ended December 31, 1996................................................................................... 13

Notes to Consolidated Financial Statements................................................................................... 14-24

</TABLE>

Information regarding financial statement schedules is contained in Item 14(a)
of Part IV of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

15
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 regarding Directors is contained under the
caption "Election of Directors" in the Registrant's definitive Proxy Statement
for its 1996 Annual Meeting of Shareholders (the "Proxy Statement") which will
be filed with the Securities and Exchange Commission, pursuant to Regulation
14A, not later than 120 days after the end of the fiscal year, which information
under such caption is incorporated herein by reference. The following
information with respect to the Executive Officers of the Company is included
pursuant to Instruction 3 of Item 401(b) of Regulation S-K:

<TABLE>
<CAPTION>
Name Age Position
- -------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Ronald E. Klingle 49 Chairman of the Board, Chief Executive Officer and a Director
Darrell D. Wilson 45 President, Chief Operating Officer and a Director
Michael D. Barwick 41 Executive Vice President, Collection Services
Charles Boryenace 46 Executive Vice President, Strategic Planning and a Director
Mark B. Cawthorne 37 Executive Vice President, Transportation Services and a Director
Timothy C. Coxson 46 Executive Vice President, Finance, Treasurer, Chief Financial
Officer and a Director
Stephen G. Kilper 37 Executive Vice President, Disposal Services and a Director
Kenneth J. McMahon 43 Executive Vice President, Sales and a Director
Jeffrey M. Grinstein 36 Executive Vice President, General Counsel and Secretary
Frances R. Klingle 50 Chief Administrative Officer and Controller
</TABLE>

____________________________________________

The above-listed individuals have been elected to the offices set opposite
their names to hold office at the discretion of the Board of Directors of the
Company.

____________________________________________

Ronald E. Klingle is a founder of the Company and has been a director,
Chairman of the Board and Chief Executive Officer since December 1988. He has
approximately 26 years of environmental experience and received his Bachelor of
Engineering degree in Chemical Engineering from Youngstown State University.
Mr. Klingle is the spouse of Frances R. Klingle who is the Chief Administrative
Officer and Controller of the Company.

Darrell D. Wilson is a founder of the Company and has been a director and
President since December 1988 and Chief Operating Officer since July 1990. He
has approximately 23 years of environmental experience including service with
governmental regulators as well as the management of several special waste
operations. He received his Bachelor of Science degree in Environmental
Sciences from Ferris State University.

Michael D. Barwick has been Executive Vice President, Collection Services
since January 1997. Prior to joining the Company, Mr. Barwick owned and
operated a private waste company on the West Coast from November 1989 through
April 1995. He received a Bachelor of Arts in Administration from Hartwell
College and is a candidate for a Masters of Business Administration at
Pepperdine University.

Charles Boryenace has been a director of the Company since August 1990 and
Executive Vice President, Strategic Planning since May 1995. Mr. Boryenace was
Executive Vice President, Finance, Treasurer, and Chief Financial Officer from
January 1991 to May 1995. Mr. Boryenace received his Bachelor of Business
Administration degree in Accounting from Kent State University.

Mark B. Cawthorne has been a director and Executive Vice President,
Transportation Services since September 1996. He has approximately 14 years of
environmental experience and previously served as Vice President, Disposal Sales
from January 1991 to September 1996 with American Waste Services, Inc. He
received a BA in Geography and Environmental Studies from the University of
Akron.

16
<PAGE>

Timothy C. Coxson has been a director and Executive Vice President, Finance,
Treasurer, and Chief Financial Officer since May 1995. Mr. Coxson was Vice
President, Corporate Financial Services, from March 1991 to May 1995. He
received a Bachelor of Business Administration degree in Accounting from The
Ohio State University.

Stephen G. Kilper has been a director and Executive Vice President, Disposal
Services, since October 1995. Mr. Kilper was Vice President, Disposal Services,
for the Company and its wholly owned disposal subsidiaries from August 1993 to
October 1995. From January 1992 to August 1993 he was an environmental engineer
for the Company's disposal operations. From February 1990 through December 1991
Mr. Kilper was an engineer with Earth Sciences Consultants, Inc. Mr. Kilper
received his degree in Agricultural Engineering from the University of
Wisconsin-Madison.

Kenneth J. McMahon has been a director and Executive Vice President, Sales
since September 1996. He previously served as Vice President of Corporate Sales
from March 1992 to September 1996 and has approximately 20 years of experience
in sales and marketing. Prior to joining the Company, he was Director of Sales
for an IBM Agent firm, Harker Consulting Services. Mr. McMahon received a
Bachelor of Business Administration Degree in finance and his Master of Business
Administration from Youngstown State University.

Jeffrey M. Grinstein has been employed by the Company since September 1990 and
has been an Executive Vice President since December 1992. He was Assistant
General Counsel until May 1991, at which time he became General Counsel and
Secretary. He was previously an associate for approximately five years with the
Youngstown, Ohio law firm of Nadler, Nadler & Burdman Co. L.P.A. He received
his Bachelor of Business Administration degree from Emory University and his
Doctor of Jurisprudence degree from The Ohio State University.

Frances R. Klingle has been Chief Administrative Officer and Controller since
July 1991. Ms. Klingle has been Controller for the Company (and predecessor
companies) since June 1986. She received a Bachelor of Arts degree in French
from Kent State University and has completed post-graduate work in accounting at
Youngstown State University. Ms. Klingle is the spouse of Ronald E. Klingle who
is Chairman of the Board, Chief Executive Officer and a director of the Company.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is contained under the captions "Meetings
and Committees of the Board" and "Compensation of Directors and Executive
Officers" in the Proxy Statement. The information under such captions is
incorporated herein by reference, except that information contained under
subpart captions "Board Committee Reports on Executive Compensation" and
"Performance Graph" are specifically not incorporated herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information required by Item 12 is contained under the captions "Voting
Securities and Principal Holders Thereof" and "Stock Ownership of Management" in
the Proxy Statement which information under such captions is incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is contained under the caption "Certain
Relationships and Related Transactions" in the Proxy Statement which information
under such caption is incorporated herein by reference.

17
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements and Independent Auditors' Opinion (See Part II, Item 8
of this report regarding incorporation by reference from the Annual Report
to Shareholders)

2. Financial Statement Schedules required to be filed by Item 8 and Paragraph
(d) of this Item 14.

The following financial statement schedule, which is applicable for years
ended December 31, 1996, 1995 and 1994, should be read in conjunction with the
previously referenced financial statements.

Independent Auditors' Report on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts

Such independent auditors' report and financial statement schedule are at page
21 through page 22 of this report. The other schedules are omitted because of
the absence of conditions under which they are required or because the
information required is shown in the consolidated financial statements or the
notes thereto.

3. Exhibits

Registrant will furnish to any shareholder, upon written request, any of the
following exhibits upon payment by such shareholder of the Registrant's
reasonable expenses in furnishing any such exhibit.

Exhibit No.
- -----------

3.1 Amended and Restated Articles of Incorporation of the Company,
incorporated herein by reference to American Waste Services, Inc.
Registration Statement on Form S-1 (No. 33-36308), Exhibit 3.1.

3.2 Amended and Restated Code of Regulations of the Company, incorporated
herein by reference to American Waste Services, Inc. Registration
Statement on Form S-1 (No. 33-36308), Exhibit 3.2.

4.1 Form of certificate evidencing ownership of Class A Common Stock of the
Company, incorporated herein by reference to American Waste Services,
Inc. Registration Statement on Form S-1 (No. 33-36308), Exhibit 4.1.

10.14 1990 Stock Option Plan, incorporated herein by reference to American
Waste Services, Inc. Registration Statement on Form S-1 (No. 33-36308),
Exhibit 10.14.

*10.15 1990 Long-Term Incentive Plan as amended and restated on February
17, 1997, Exhibit 10.15.

10.37 Agreement Regarding the Sale and Purchase of the East Liverpool
Landfill, between East Liverpool Landfill, Inc. and the City of East
Liverpool, Ohio, dated February 2, 1990, incorporated herein by
reference to American Waste Services, Inc. Registration Statement on
Form S-1 (No. 33-36308), Exhibit 10.37.

10.39 Finders Agreement between East Liverpool Landfill, Inc. and Whan, Inc.,
dated as of August 6, 1990, incorporated herein by reference to American
Waste Services, Inc. Registration Statement on Form S-1 (No. 33-36308),
Exhibit 10.39.

10.56 American Waste Services, Inc. Participating Companies Profit Sharing
Plan and Trust, as

18
<PAGE>

Exhibit No.
- -----------

amended and restated effective January 1, 1993 in accordance with the
Nonstandardized Adoption Agreement and Prototype Cash or Deferred
Profit-Sharing Plan and Trust/Custodial Account, incorporated herein by
reference to American Waste Services, Inc. Form 10-K for the year ended
December 31, 1992, Exhibit 10.56.

10.57 Agreed Judgment Entry of Consolidation, Settlement and Dismissal
dated August 29, 1994, modifying Agreement Regarding the Sale and
Purchase of the East Liverpool Landfill, referenced as Exhibit 10.37 to
the registrant's Form 10-K for the year ended December 31, 1993, Exhibit
10.57.

10.60 Loan Agreement dated as of December 23, 1994, among American Waste
Services, Inc., NBD Bank, N.A., The Second National Bank of Warren, and
NBD Bank, N.A., as Agent, Exhibit 10.60.

10.61 First Amendment to Loan Agreement dated October 19, 1995 among
American Waste Services, Inc., NBD Bank, The Second National Bank of
Warren, and NBD Bank, as Agent, referenced as Exhibit 10.61 to the
registrant's Form 10-Q for the period ended September 30, 1995.

10.62 Second Amendment to Loan Agreement dated February 19, 1996 among
American Waste Services, Inc., NBD Bank, The Second National Bank of
Warren, and NBD Bank, as Agent, Exhibit 10.62.

10.63 Third amendment to Loan Agreement dated December 31, 1996 among
American Waste Services, Inc., NBD Bank, The Second National Bank of
Warren, and NBD Bank, as Agent, Exhibit 10.63.

11.1 Omitted - inapplicable. See "Net income (loss) per share" on page 15
of the Annual Report to Shareholders.

13.1 Company's 1996 Annual Report to Shareholders (except for the pages and
information therein expressly incorporated by reference in this Form 10-
K, the Annual Report to Shareholders is provided solely for the
information of the Commission and is not to be deemed "filed" as part of
the Form 10-K).

21.1 Subsidiaries of the Company.

23.1 Independent Auditors' Consent.

27 Financial Data Schedule

* Represents management contract or compensatory plan or arrangement required
to be filed or incorporated by reference, as an exhibit to this report
pursuant to Part IV, Item 14(c).

______________________________________________

(b) No Form 8-K reports were filed during the last quarter of the period covered
by this report.

(d) Reference is made to Item 14 (a)(2) above for the index to the financial
statements and financial statement schedules.

19
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the 21st day of March,
1997.

AMERICAN WASTE SERVICES, INC.
(Registrant)

By /s/ TIMOTHY C. COXSON
-------------------------------------------
Timothy C. Coxson - Executive Vice
President, Finance, Treasurer and Chief
Financial 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 indicated, on the 21st day of March, 1997.

Signatures Title
---------- -----

/s/ RONALD E. KLINGLE Chairman of the Board, Chief
- ------------------------------ Executive Officer and Director
Ronald E. Klingle

/s/ DARRELL D. WILSON President, Chief Operating Officer
- ------------------------------ and Director
Darrell D. Wilson

/s/MARK B. CAWTHORNE Executive Vice President, Transportation
- ------------------------------ Services and Director
Mark B. Cawthorne

/s/ CHARLES BORYENACE Executive Vice President, Strategic Planning
- ------------------------------ and Director
Charles Boryenace

/s/ TIMOTHY C. COXSON Executive Vice President, Finance, Treasurer,
- ------------------------------ Chief Financial Officer and Director
Timothy C. Coxson (Principal Financial and Accounting Officer)

/s/ STEPHEN G. KILPER Executive Vice President, Disposal
- ------------------------------ Services and Director
Stephen G. Kilper

/s/ KENNETH J. McMAHON Executive Vice President, Sales
- ------------------------------
Kenneth J. McMahon

/s/ SANFORD B. FERGUSON Director
- ------------------------------
Sanford B. Ferguson

/s/ JAMES A. JOHNSON Director
- ------------------------------
James A. Johnson

/s/JOHN R. MILLER Director
- ------------------------------
John R. Miller

/s/ F. OLIVER NICKLIN, JR. Director
- ------------------------------
F. Oliver Nicklin, Jr.

/s/ Director
- ------------------------------
George P. Ellis

20
<PAGE>

AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(thousands of dollars)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Balance at Additions
DESCRIPTION Beginning ---------------------------------- Deductions Balance at End
of Year Charged to Costs Charged to Other (1) of Year
and Expenses Accounts
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Allowance for Doubtful Accounts:

Year ended December 31,

1996 $778 $(85) $-- $185 $506
==== ====== === ==== ====

1995 $991 $610 $-- $823 $778
==== ====== === ==== ====

1994 $716 $1,007 $-- $732 $991
==== ====== === ==== ====
</TABLE>

(1) Receivables written-off as uncollectible, net of recoveries.

21
<PAGE>

AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES

EXHIBIT INDEX
_________________________

Exhibit
-------

10.15 1990 Long-Term Incentive Plan as amended and restated in February 17,
1997, Exhibit 10.15

10.63 Third Amendment to Loan Agreement dated December 31, 1996
among American Waste Services, Inc., NBD Bank, The
Second National Bank of Warren, and NBD Bank, as Agent,
Exhibit 10.63.

21.1 Subsidiaries of the Company.

23.1 Independent Auditors' Consent.

27 Financial Data Schedule

<PAGE>

EXHIBIT 10.15

AMERICAN WASTE SERVICES, INC.

1990 Long-Term Incentive Plan
-----------------------------

As Amended and Restated
Effective as of February 17, 1997

1. Purposes. The principal purposes of the 1990 Long-Term Incentive
--------
Plan (the "Plan") are: (a) to improve individual employee performance by
providing long-term incentives and rewards to employees of the Company and its
Affiliates, (b) to assist the Company and its Affiliates in attracting,
retaining and motivating employees and non-employee directors with experience
and ability, and (c) to associate the interests of such employees and directors
with those of the Company's shareholders.

2. Definitions. Unless the context clearly indicates otherwise, the
-----------
following terms, when used in this Plan, shall have the meanings set forth
below:

(a) "Affiliate" means a majority-owned subsidiary, directly or indirectly,
of the Company, including a company under contract to purchase which will become
a majority owned subsidiary upon such purchase.

(b) "Board of Directors" means the Board of Directors of the Company.

(d) "Committee" means the committee, consisting of two or more persons,
which is appointed by the Board of Directors to administer the Plan.

(e) "Common Stock" or "Stock" means the Class A Common Stock, no par
value, of the Company.

(f) "Company" means American Waste Services, Inc. and its successors.

(g) "Disabled" shall have the meaning set forth in the Company's long-term
disability program applicable to such employee or, if there is no such program,
as provided in Section 22(e) of the Code.
<PAGE>

(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(i) "Fair Market Value" means the amount determined by the Committee, or,
in the case of Options granted to Outside Directors pursuant to Section 6(i),
the Board of Directors, to be the fair market value of the Common Stock at the
time in question.

(j) "Grant Date" means the date an Option is granted under the Plan. The
date of grant of an Option shall be the date as of which the Committee, or, in
the case of Options granted to Outside Directors pursuant to Section 6(i), the
Board of Directors, determines that such Option shall become effective.

(k) "Initial Public Offering" means an initial public offering of Common
Stock to the public on or before December 30, 1990.

(l) "Option" means a right granted under the Plan to an Optionee to
purchase a share of Common Stock at a fixed price for a specified period of
time.

(m) "Optionee" means an eligible employee of the Company or an Affiliate
who has received an Option granted under the Plan.

(n) "Option Price" means the price at which a share of Common Stock
covered by an Option granted hereunder may be purchased.

(o) "Outside Director" means a member of the Board of Directors or of the
board of directors of an Affiliate who is not an employee of the Company or any
Affiliate.

(p) "Rule 16b-3" means Rule 16b-3, as amended (17 CFR (S) 240.16b-3) or
any successor rule issued under the Exchange Act.

(q) "Subsidiary" means a corporation in a chain of corporations beginning
with the Company if each corporation in the chain, other than the last
corporation, owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.

(r) "Ten Percent Shareholder" means an individual owning stock possessing
10% or more of the total combined voting power of all classes of stock of the
Company or a Subsidiary.

3. Administration. The Plan shall be administered by the Committee, which
--------------
shall have full power and authority to administer and interpret the Plan and to
adopt such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan as the Committee deems necessary or advisable. The
Committee's powers include, but are not limited to (subject to the

-2-
<PAGE>

specific limitations described herein), authority to determine the employees to
be granted Options under the Plan, to determine the size and applicable terms
and conditions of grants to be made to such employees, to determine the time
when Options will be granted and to authorize grants to eligible employees.

The Committee's interpretations of the Plan, and all actions taken and
determinations made by the Committee concerning any matter arising under or with
respect to the Plan or any Options granted hereunder, shall be final, binding
and conclusive on all interested parties, including the Company, its Affiliates,
its shareholders and all former, present and future employees of the Company.
The Committee may delegate some or all of its power and authority hereunder to
the Chairman and Chief Executive Officer of the Company or others, such
delegation to be subject to such terms and conditions as the Committee in its
discretion shall determine and to the requirements of Rule 16b-3. The Committee
may as to all questions of accounting rely conclusively upon any determinations
made by the independent public accountants of the Company. The Committee shall
establish procedures for conducting its business.

The Board of Directors may exercise any of the authority conferred upon the
Committee hereunder. In the event of such exercise of authority by the Board of
Directors, references in the Plan to the Committee shall be deemed to refer to
the Board of Directors as appropriate.

4. Stock Available for Options. The shares that may be delivered or
---------------------------
purchased under the Plan shall not exceed an aggregate of 3 million shares of
Common Stock, subject to any adjustments which may be made pursuant to Section 9
hereof. Shares of Stock used for purposes of the Plan may be either shares of
authorized but unissued Common Stock or treasury shares or both. Stock covered
by Options which have terminated or expired prior to exercise or have been
surrendered or canceled shall be available for further option grants hereunder.

5. Eligibility. All those salaried employees of the Company or any
-----------
Affiliates as shall be determined from time to time by the Committee shall be
eligible to participate in the Plan. Outside Directors shall participate in the
Plan only under Section 6(i).

6. Terms and Conditions of Options. Each Option granted hereunder shall be
-------------------------------
in writing and shall contain such terms and conditions as the Committee may
determine, subject to the following:

(a) Type. All Options granted under the Plan are intended to be non-
----
qualified stock options for federal income tax purposes except for those Options
designated as incentive stock options which qualify under Section 422 of the
Code. No incentive

-3-
<PAGE>

stock options shall be granted to an Outside Director or to an employee of an
Affiliate which is not a Subsidiary.

(b) Price. The Option Price shall be not less than 85% of the Fair Market
-----
Value of Common Stock on the Grant Date as determined by the Committee, provided
that for Options designated as incentive stock options the Option Price shall be
not less than 110% of Fair Market Value for employees who are Ten Percent
Shareholders and not less than 100% of Fair Market Value for other employees.
The Option Price of all Options granted prior to the Initial Public Offering
shall be the public offering price in such Offering.

(c) Maximum Grants. No employee may be granted Options in the aggregate
--------------
which would result in that employee receiving more than 10% of the maximum
number of shares available for issuance under the Plan. In the case of an
Option designated as an incentive stock option, the aggregate Fair Market Value
of Common Stock (determined at the Grant Date) with respect to which incentive
stock options are exercisable for the first time by an employee during any
calendar year (under the Plan and under all other such plans of the Company or a
Subsidiary) shall not exceed $100,000.

(d) Term and Exercise Dates. Options shall have a term of no longer than
-----------------------
ten years from the Grant Date except that for an Option designated as an
incentive stock option which is granted to a Ten Percent Shareholder, the Option
shall have a term no longer than five years (the date on which the Option
terminates is herein called the "Expiration Date"). No Option shall be
exercisable prior to one year after its grant, unless otherwise provided by the
Committee (but in no event before 6 months after its grant), and thereafter
Options shall become exercisable in installments, if any, as provided by the
Committee. Options must be exercised for full shares of Common Stock. To the
extent that Options are not exercised when they become initially exercisable,
they shall be carried forward and be exercisable until the expiration of the
term of such Options, subject to Section 6(g) hereof. Options granted prior to
the Initial Public Offering are contingent on the consummation of such Offering.

(e) Exercise of Option. To exercise an Option, the holder thereof shall
------------------
give notice of his or her exercise to the Secretary of the Company, specifying
the number of shares of Common Stock to be purchased and identifying the Option
being exercised. From time to time the Committee may establish procedures for
effecting such exercises. No fractional shares shall be issued as a result of
exercising an Option. An Option is exercisable during an Optionee's lifetime
only by the Optionee, provided, however, that in the event the Optionee is
Disabled, such Options may be exercised by such Optionee's guardian or legal
representative

-4-
<PAGE>

designated or appointed to conduct his or her business affairs under the terms
described in Section 6(g) hereof.

(f) Payment of Option Price and Taxes.
---------------------------------

(i) The purchase price for the Options being exercised must be paid in
full at the time of exercise. Such price shall be paid in cash, in Common Stock
of the Company having a Fair Market Value, as of the close of the business day
immediately preceding the date of exercise, equal to the exercise price or the
portion thereof being paid in Common Stock (provided that such Common Stock had
been owned by the Optionee for at least six months), or as the Committee may
otherwise approve.

(ii) To enable the Company to meet any applicable federal (including
FICA), state and other withholding tax requirements, an Optionee shall also be
required to pay to the Company at the time of exercise the amount of tax which
the Company determines is to be withheld. No share of Common Stock will be
delivered to any 0ptionee until all such amounts have been paid. An Optionee
may satisfy such withholding tax requirement by electing to have the Company
withhold Common Stock otherwise issuable to the Optionee, or to deliver to the
Company previously acquired Common Stock, which has a Fair Market Value on the
date the tax is determined to be due (the "Tax Date") on the exercise of his or
her Option which is at least equal to the amount required to be withheld. Such
election must be made in writing at the time prescribed by the Committee prior
to the Tax Date and shall be irrevocable. Elections by Optionees who are
subject to Section 16(b) of the Exchange Act shall be subject to the subsequent
disapproval of the Committee and shall be subject to such further requirements
of Rule 16b-3 or other law or regulation as may be applicable.

(g) Effect of Termination of Employment, Disability or Death. No
--------------------------------------------------------
Option may be exercised by an Optionee after the termination for any reason of
his or her employment with the Company or an Affiliate, except that:

-5-
<PAGE>

(i) if such termination occurs by reason of the Optionee's death or
Disability, all portions of the Option then held by the Optionee which are
exercisable on the date of termination and all portions which would have become
exercisable had the Optionee continued in employment until the third anniversary
of his or her death or Disability shall be exercisable during the six-month
period subsequent to such termination date by, in the case of death, the persons
designated in the Optionee's will or his or her legal representative designated
or appointed to conduct his or her legal affairs;

(ii) if such termination occurs by reason other than death, Disability
or cause, all portions of the Option then held by the Optionee which are
exercisable at the date of termination shall continue to be exercisable by the
Optionee for a three-month period subsequent to such termination;

(iii) if such termination is for cause, the Optionee shall forfeit any
portion of his or her Option which was unexercised or unexercisable at such
termination; and

(iv) if the Optionee dies while Disabled during the six-month period
described in clause (i) or dies during the three-month period described in
clause (ii), all portions of his or her Option which were exercisable at the
time of the Optionee's death shall continue to be exercisable for a six-month
period subsequent to such date of death by the persons designated in the
Optionee's will or his or her legal representatives.

Transfer from employment with the Company to an Affiliate, from an
Affiliate to the Company or from an Affiliate to another Affiliate shall not be
treated as a termination of employment.

Notwithstanding the foregoing, the Option shall in no event be
exercisable by the Optionee or his or her heirs or legal representatives after
the Expiration Date.

(h) Nontransferability of Options. During an Optionee's lifetime,
-----------------------------
his or her Options shall not be transferable and shall only be exercisable by
the Optionee (except as provided in Section

-6-
<PAGE>

6(g) above) and any purported transfer shall be null and void. No Option shall
be transferable other than by will or the laws of descent and distribution.

(i) Outside Directors.
-----------------

(i) Prior to February 17, 1997, an Option for 25,000 shares of Common
Stock shall be granted to each Outside Director upon his or her initial
appointment or election as a director and such Options shall become exercisable
with respect to 20% of such shares on each anniversary of such appointment or
election, provided that such person is a director of the Company or an Affiliate
on such anniversary. Effective February 17, 1997, the Board of Directors may,
from time to time, in its discretion, grant Options to one or more Outside
Directors, subject to such terms and conditions as the Board of Directors may
determine, which such terms and conditions shall not be inconsistent with the
remaining provisions of this Section 6(i) and other applicable provisions of the
Plan.

(ii) The Option Price shall be the Fair Market Value of the
Common Stock on the Grant Date.

(iii) No Option may be exercised by an Outside Director
after he or she ceases to be a director of the Company or an Affiliate by reason
of death, Disability, resignation, removal or other reason, except that:

(A) if such cessation occurs by reason of the Outside
Director's death or Disability, the portion of his or her Option which was
exercisable on such cessation and the portion which would become exercisable had
the Outside Director continued as a director until the third anniversary of his
or her death or Disability shall be exercisable for six months following such
cessation (but not beyond the Expiration Date), except that if such cessation
was due to Disability and the former Outside Director dies during such six-month
period, such portions of his or her Option shall be exercisable for a six-month
period following such

-7-
<PAGE>

death by the persons designated in the Outside Director's will or his or her
legal representatives (but not beyond the Expiration Date); and

(B) if such cessation occurs by reason other than the Outside
Director's death or Disability, the portion of his or her Option which was
exercisable on such cessation shall be exercisable for six months following such
cessation (but not beyond the Expiration Date), except that if the former
Outside Director dies during such six-month period, such portion of his or her
Option shall be exercisable for a six-month period following such death by the
persons designated in the Outside Director's will or his or her legal
representatives (but not beyond the Expiration Date).

(iv) The provisions of the Plan shall apply to the Options granted to
Outside Directors to the extent they are not inconsistent with the provisions of
paragraphs (i) though (iii), above.

7. Amendment. The Board of Directors of the Company may, at any
---------
time, amend, suspend or terminate the Plan, in whole or in part, provided that
(i) no such action shall adversely affect any rights or obligations with respect
to any grants theretofore made hereunder, and (ii) any shareholder approval
required by the securities laws, stock exchange or NASDAQ rules or other
applicable law or regulation is obtained. The Committee may amend the terms and
conditions of outstanding Options, provided, however, that (x) no such amendment
shall be adverse to the holder of an Option without the approval of such holder,
and (y) the amended terms of the Option would be permitted under the Plan.

8. Registration, Listing and Qualification of Shares. Each Option
-------------------------------------------------
shall be subject to the requirement that if at any time the Committee shall
determine that the registration, listing or qualification of the shares covered
thereby upon any securities exchange or under any federal or state securities or
other law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the purchase of shares thereunder, no such Option may be
exercised unless and until such registration, listing, qualification, consent or
approval shall have been effected or obtained free of any condition not
acceptable to the Committee. Any person exercising an Option shall make such

-8-
<PAGE>

representations and agreements and furnish such information as the Committee may
request to assure compliance with the foregoing or any other applicable legal
requirements.

9. Adjustment for Change in Stock Subject to Plan. In the event of
----------------------------------------------
any change in the outstanding shares of Common Stock by reason of any stock
split, stock dividend, spin-off, recapitalization, merger, consolidation,
combination, exchange of shares, reorganization, sale by the Company of all or
substantially all of its assets, distribution to shareholders other than a
normal cash dividend, or other similar corporate change, such equitable
adjustments may be made in the Plan and the Options granted hereunder as the
Committee determines are necessary or appropriate, including, if necessary, an
adjustment in the number of shares and prices per share or the type or kind of
shares or property applicable to Options then outstanding and in the number of
shares which are reserved for issuance under the Plan. Any such adjustment
shall be conclusive and binding for all purposes of the Plan.

10. No Rights to Options or Employment. Except as provided in
----------------------------------
Section 6(i), no person shall have any claim or right to be granted an Option
under the Plan. Receipt of an Option under the Plan shall not give a person any
right to receive any other grant under the Plan. An Optionee shall have no
rights to or interest in any Option except as set forth herein. Neither the
Plan nor any action taken hereunder shall be construed as giving any person any
right to be retained as an employee or director of the Company or any Affiliate.

11. Rights as a Shareholder. An Optionee under the Plan shall have
-----------------------
no rights as a holder of Common Stock with respect to Options granted hereunder,
unless and until certificates for shares of Common Stock are issued to such
Optionee.

12. Other Actions. This Plan shall not restrict the authority of the
-------------
Committee or of the Company to grant stock options, other than under the Plan,
to or with respect to any employee or other person.

13. Costs and Expenses. Except as provided in Section 6(f) hereof
------------------
with respect to taxes, the costs and expenses of administering the Plan shall be
borne by the Company and its Affiliates and shall not be charged to any grant
nor to any person receiving a grant.

14. Plan Unfunded. The Plan shall be unfunded. Except for reserving
-------------
a sufficient number of authorized shares Common Stock to the extent required by
law to meet the requirements of the Plan, the Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any grant under the Plan.

-9-
<PAGE>

15. Governing Law. This Plan shall be governed by and construed in
-------------
accordance with the laws of the State of Ohio.

16. Effective Date and Duration of Plan. This Plan shall be
-----------------------------------
effective as of August 1, 1990, conditioned upon (a) the effectiveness of the
Initial Public Offering, (b) approval of the shareholders of the Company by July
31, 1991 and (c) as to any amendments, the effective dates thereof. No Option
shall be granted under the Plan after July 31, 2000.

-10-

<PAGE>

Exhibit 10.63

THIRD AMENDMENT TO LOAN AGREEMENT{PRIVATE}
---------------------------------

THIS THIRD AMENDMENT TO LOAN AGREEMENT, dated as of December 31, 1996
(this "Amendment"), is between AMERICAN WASTE SERVICES, INC., an Ohio
corporation (the "Company"), the banks set forth on the signature pages hereof
(collectively, the "Banks") and NBD BANK, formerly known as NBD Bank, N.A., as
agent for the Banks (in such capacity, the "Agent").

RECITALS
--------

A. The Company, the Banks and the Agent are parties to a
Loan Agreement, dated as of December 23, 1994, as amended by a First Amendment
to Loan Agreement dated as of October 19, 1995 and a Second Amendment to Credit
Agreement dated as of February 19, 1996 (as now and hereafter amended, the "Loan
Agreement"), pursuant to which the Banks agreed, subject to the terms and
conditions thereof, to extend credit to the Company.

B. The Company has requested that the Agent and the Banks amend
certain terms and provisions of the Loan Agreement and the Agent and the Banks
are willing to do so strictly in accordance with the terms hereof.

TERMS
-----

In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:

ARTICLE 1.
AMENDMENTS
----------

Upon fulfillment of the conditions set forth in Article 3 hereof, the
Loan Agreement shall be amended as follows:

1.1 Section 1.1 shall be amended as follows:

(a) The definition of "Applicable Floating Rate Margin" shall
be amended by deleting "37.5 basis points" and inserting "0 basis points" in
place thereof.

(b) The definition of "Maturity Date" shall be amended by
deleting the reference therein to "Effective Date" and inserting "Third
Amendment Effective Date" in place thereof.
<PAGE>

(c) The definition of "Termination Date" shall be amended by
deleting the reference to "three (3) years from the Effective Date" and
inserting "December 31, 2000".

(d) A new definition of "Third Amendment Effective Date" shall
be added in appropriate alphabetical order as set forth below:

"Third Amendment Effective Date" shall mean December 31, 1996.
------------------------------

1.2 Section 2.1(b) shall be amended by deleting the reference to
"$10,000,000" and inserting "$13,000,000" in place thereof.

1.3 Section 2.3(a) shall be amended by deleting "five-eighths of one
percent (5/8 of 1%)" and inserting "three-eighths of one percent (3/8 of 1%)".

1.4 Section 2.9 shall be deleted and the following shall be inserted
in place thereof:

2.9 Minimum Amounts. Except for Advances which exhaust the
----------------
entire remaining amount of the Commitments, each Advance (other
than a Letter of Credit Advance) shall be in a minimum amount
of, with respect to Eurodollar Rate Loans, $500,000.00 and in an
integral multiple of $100,000.00, with respect to Floating Rate
Loans, $100,000.00 and in an integral multiple of $100,000.00
and each Letter of Credit Advance may be in any amount.

1.4 Section 5.2 shall be amended as follows:

(a) Section 5.2(a) shall be deleted and the following shall be
inserted in place thereof:

(a) Intentionally reserved.

(b) Section 5.2(b) shall be deleted in its entirety and the
following shall be inserted in place thereof:

(b) Tangible Net Worth. Permit or suffer Consolidated
-------------------
Tangible Net Worth of the Company and its Subsidiaries as of the end
of any fiscal quarter of the Company to be less than the sum of (i)
$62,000,000 plus (ii) an amount equal to 50% of the Cumulative Net
Income of the Company and its Subsidiaries.

-2-
<PAGE>

(d) Cash Flow Coverage Ratio. Permit or suffer the
-------------------------
Consolidated Cash Flow Coverage Ratio of the Company and its
Subsidiaries to be less than (i) 1.0 to 1.0 for the period from and
including the Third Amendment Effective Date to and including December
31, 1997 and (ii) thereafter, 1.15 to 1.0, in each case, calculated as
of the end of each fiscal quarter for the four (4) consecutive fiscal
quarters then ending. For purposes of calculating the foregoing, the
Current Portion of Funded Indebtedness will include Revolving Credit
Loans to the extent required to be so classified under generally
accepted accounting principals and the effect of the following items
shall be excluded: (i) a one-time charge not to exceed $6,820,856 to
be taken in the fourth quarter of fiscal year 1995 related to closure
and post-closure obligations of East Liverpool Landfill, Inc., a
subsidiary of the Company, pursuant to a Trust Agreement dated
February 3, 1993 between East Liverpool Landfill, Inc. and The Second
National Bank of Warren, as trustee, (ii) a write-down of the value of
the landfill located in East Liverpool, not to exceed $11,685,216, to
be taken in the fourth quarter of fiscal year 1995 and (iii) the
following items to be taken in the fourth quarter of fiscal year 1995:
(A) a write-down of Dart assets in the amount of $291,991, (B) a
reserve in the amount of $940,500 related to legal action involving
the Indiana Department of Environmental Management and (C) a
prepayment premium in the amount of $750,391.

1.5 Sections 5.2(e) shall be amended by deleting the reference
therein to "1.5 to 1" and inserting "2.25 to 1" in place thereof.

ARTICLE 2.
REPRESENTATIONS
---------------

The Company represents and warrants to the Agent and the Banks that:

2.1 The execution, delivery and performance of this Amendment is
within its powers, has been duly authorized and is not in contravention with any
law, of the terms of its Articles of Incorporation or By-laws, or any
undertaking to which it is a party or by which it is bound.

2.2 This Amendment is the legal, valid and binding obligation of the
Company enforceable against it in accordance with the terms hereof subject to
the effects of any applicable

-3-
<PAGE>

bankruptcy, insolvency, reorganization, moratorium or other law affecting
creditors' rights generally, and to the effects of general principles of equity.

2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Article 4 of the Loan Agreement are
true on and as of the date hereof with the same force and effect as if made on
and as of the date hereof.

2.4 No Event of Default or any event or condition which might become
an Event of Default with notice or lapse of time, or both, exists or has
occurred and is continuing on the date hereof.

ARTICLE 3.
CONDITIONS OF EFFECTIVENESS
---------------------------

This Amendment shall not become effective until each of the following
has been satisfied:

3.1 This Amendment shall be signed by the Company, the Banks and the
Agent.

3.2 Each of the Guarantors shall have executed the Consent and
Agreement at the end of this Amendment.

3.3 The Company shall have paid an amendment fee for the pro rata
benefit of the Banks in an amount equal to $18,000.

ARTICLE 4.
MISCELLANEOUS
-------------

4.1 References in the Loan Agreement or in any note, certificate,
instrument or other document to the "Loan Agreement" shall be deemed to be
references to the Loan Agreement as amended hereby and as further amended from
time to time.

4.2 The Company agrees to pay and to save the Agent harmless for the
payment of all costs and expenses arising in connection with this Amendment,
including the reasonable fees of counsel to the Agent in connection with
preparing this Amendment and the related documents.

4.3 The Company acknowledges and agrees that the Agent and the Banks
have fully performed all of their obligations under all documents executed in
connection with the Loan Agreement and all actions taken by the Agent and the
Banks are reasonable and appropriate under the circumstances and within their
rights under the Loan Agreement and all other documents executed in connection
therewith and otherwise available. The Company represents

-4-
<PAGE>

and warrants that it is not aware of any claims or causes of action against the
Bank, any participant lender or any of their successors or assigns.

4.4 Except as expressly amended hereby, the Company agrees that the
Credit Agreement, the Notes, the Guaranties and all other documents and
agreements executed by the Company in connection with the Loan Agreement in
favor of the Agent or any Bank are ratified and confirmed and shall remain in
full force and effect and that it has no set off, counterclaim or defense with
respect to any of the foregoing. Terms used but not defined herein shall have
the respective meanings ascribed thereto in the Loan Agreement.

4.5 This Amendment may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument.

IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of December 31, 1996, to be
effective as of the Third Amendment Effective Date.

AMERICAN WASTE SERVICES, INC.

By: /s/ Timothy C. Coxson
_____________________________________

Its: Chief Financial Officer
________________________________

NBD BANK, INDIVIDUALLY AS A BANK AND AS AGENT

By: /s/ Andrew W. Strait
_____________________________________

Its: Vice President
________________________________

THE SECOND NATIONAL BANK OF WARREN

By: /s/ Norman H. Babcock
___________________________________

Its: Vice President
_________________________________

-5-
<PAGE>

CONSENT AND AGREEMENT
---------------------

As of the date and year first above written, each of the undersigned
hereby:

(a) fully consents to the terms and provisions of the above Amendment
and the consummation of the transactions contemplated hereby and agrees to all
terms and provisions of the above Amendment applicable to it;

(b) agrees that each Guaranty and all other agreements executed by any
of the undersigned in connection with the Credit Agreement or otherwise in favor
of the Agent or the Banks (collectively, the "Security Documents") are hereby
ratified and confirmed and shall remain in full force and effect, and each of
the undersigned acknowledges that it has no setoff, counterclaim or defense with
respect to any Security Document; and

(c) acknowledges that its consent and agreement hereto is a condition
to the Bank's obligation under this Amendment and it is in its interest and to
its financial benefit to execute this consent and agreement.

MAHONING LANDFILL, INC.

By: /s/ Timothy C. Coxson
___________________________________

Its: Chief Financial Officer
_________________________________

DARTAMERICA, INC.

By: /s/ Pamela J. Corso
___________________________________

Its: Vice President, Administration
_________________________________

EARTH SCIENCES CONSULTANTS, INC.

By: /s/ George P. Ellis
___________________________________

Its: CEO
________________________________

-6-
<PAGE>

ANTECH, LTD.

By: /s/ David M. Miller
___________________________________

Its: President
_________________________________

-7-

<PAGE>

AMERICAN WASTE SERVICES, INC.

[LOGO OF AMERICAN WASTE SERVICES, INC.]

1996 ANNUAL REPORT
<PAGE>

- --------------------------------------------------------------------------
Financial Highlights

(in thousands, except for per share amounts and percentages)
<TABLE>
<CAPTION>

For the year 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Net operating revenues.......................... $ 79,024 $ 83,700
Income (loss) from operations................... 4,476 (40,304)
Net income (loss)............................... 3,122 (29,241)
Net income (loss) per share..................... .10 (.98)
Net cash provided by operating activities....... $ 18,922 $ 15,155

At year-end 1996 1995
- --------------------------------------------------------------------------
Working capital................................. $ 6,283 $ 16,131
Total assets.................................... 117,463 115,736
Total debt...................................... 4,141 9,106
Shareholders' equity............................ 70,932 67,245
Percent of debt-to-total capital employed....... 6% 12%
</TABLE>

- --------------------------------------------------------------------------

The Company

American Waste Services, Inc. provides integrated waste management and
environmental services, which include disposal, collection, technical and
transportation services to industrial, commercial, municipal and governmental
customers primarily in selected eastern and midwestern U.S. markets. The
Company operates nonhazardous solid waste landfills for the disposal of special
waste and municipal solid waste; transports hazardous and nonhazardous waste;
provides transportation and disposal brokerage and management services; provides
collection services; and provides environmental engineering, site assessment,
analytical laboratory and remediation services. The Company, as part of its
transportation business, is also a common carrier of general and bulk
commodities within the United States and several provinces of Canada.

- --------------------------------------------------------------------------

Contents
<TABLE>
<S> <C>
Financial Highlights............................ 1
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...................... 2
Consolidated Balance Sheets..................... 10
Consolidated Statements of Operations........... 11
Consolidated Statements of
Cash Flows..................................... 12
Consolidated Statements of
Shareholders' Equity........................... 13
Notes to Consolidated Financial
Statements..................................... 14
Independent Auditors' Report.................... 24
Digest of Financial Data........................ 25
Company Location Directory...................... 26
Directors and Officers.......................... 27
Shareholder Information......................... 28
</TABLE>

1
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
consolidated financial statements and accompanying notes.

Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, 'forward looking statements.' The
Company cautions readers that forward looking statements, including, without
limitation, those relating to the Company's future business prospects, revenues,
working capital, liquidity, capital needs, interest costs, and income, are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward looking statements, due to
risks and factors identified herein and from time to time in the Company's
reports filed with the Securities and Exchange Commission.

Liquidity and Capital Resources

The Company has been able to generate sufficient financial resources from both
internal and external sources to meet operating needs, repay indebtedness, fund
capital spending programs, fund business acquisitions and fund financial
assurance requirements. During 1996, 1995 and 1994, cash provided by operations
totaled $18.9 million, $15.2 million and $11.8 million, respectively.

Working capital decreased to $6.3 million at December 31, 1996 compared with
$16.1 million at December 31, 1995. The decrease in working capital was
primarily attributable to increased capital spending in 1996 compared to 1995
and the repayment of long-term indebtedness. The balance of accounts payable at
December 31, 1996 was $8.5 million compared to $6 million at December 31, 1995.
This increase is primarily due to unpaid retainage and invoices associated with
capital spending as of December 31, 1996. The balance of accounts receivable at
December 31, 1996 was relatively unchanged from the balance at December 31, 1995
despite a decrease in net operating revenues of $4.7 million for the year. The
decrease in net operating revenues occurred in the first quarter of 1996 and, as
such, did not have a material impact on the accounts receivable at December 31,
1996.

In December 1994, the Company entered into an $18 million unsecured revolving
credit facility with two banks. Such facility provided for revolving credit
loans during the first three years and/or term loans payable quarterly with a
final maturity date no later than seven years from the date of the agreement.
On December 31, 1996 the Company amended such agreement to extend the revolving
credit loans to December 31, 2000 and the final maturity date on term loans to
no later than seven years from the amendment date. On December 31, 2000 the
Company must convert any outstanding revolving credit loans into term loans
payable quarterly with a final maturity date no later than December 31, 2003.
The agreement also provides for the issuance of letters of credit up to an
aggregate amount of $13 million until December 31, 2000. The Company had $8
million and $-0- in outstanding letters of credit at December 31, 1996 and
December 31, 1995, respectively. The letters of credit were utilized to
capitalize a captive insurance company, incorporated and licensed under the laws
of the State of Vermont, which issued an insurance policy to provide the
required financial assurances for closure and post-closure monitoring costs to
the State of Ohio for the Company's American and Mahoning landfill facilities.

2
<PAGE>

amount of borrowings outstanding under the revolving credit facility at December
31, 1996 and December 31, 1995 was $2.6 million and $7.1 million, respectively,
and the weighted average interest rate was 8.25% at December 31, 1996.

During 1996 the Company reduced its outstanding long-term debt by $4.9
million. Aggregate annual maturities of all of the Company's long-term debt
scheduled to be paid in the years 1997 through 2001 total $.3 million, $.2
million, $.1 million, $.1 million and $.9 million, respectively.

During 1996 capital spending totaled $18.8 million which was principally
related to continued landfill development and expansion, installation of a
landfill gas extraction system, and the acquisition of landfill and
transportation equipment. The Company's capital spending in 1997 is expected to
range from $7 million to $9 million, approximately $1.4 million of which is
committed pursuant to contracts. Capital expenditures in 1997 will relate
principally to landfill development, acquiring transportation equipment,
acquiring additional equipment to support disposal operations, acquiring
equipment associated with collection services, and engineering and construction
costs relating to regulatory compliance at the Company's landfills. Compliance
with current and future regulatory requirements may require the Company, as well
as others in the waste management industry, from time to time to make
significant capital and operating expenditures.

As a result of federal and state laws and regulations, the Company has future
financial obligations with regard to closure costs and post-closure monitoring
costs associated with the disposal sites it operates. Although the precise
amount of these future obligations cannot be determined, the Company has
developed procedures to estimate such total projected costs based on currently
available facts, existing technology and presently enacted laws and regulations.
As of December 31, 1996, the Company estimates that the total closure costs and
post-closure monitoring costs it will incur for all of its disposal facilities
is approximately $31.2 million. The Company currently estimates expenditures
for closure and post-closure monitoring costs during 1997 to be $1.3 million.
In accordance with Ohio's financial assurance regulations, the Company currently
estimates that it will be required to ultimately provide $32.5 million of
financial assurances to the State of Ohio relating to such costs; however, such
financial assurances are reduced by actual expenditures. At December 31, 1995
the Company had deposited approximately $5.1 million into trusts for the benefit
of the Ohio EPA to fund the financial assurance requirements for its landfills.
During 1996 the Company utilized insurance to satisfy the financial assurance
requirements for its American and Mahoning landfill facilities. As a result of
using such insurance, in June 1996 the Company received $2.5 million from its
trust fund deposits relating to the American landfill facility, and in July
1996, the Company received $.7 million from its trust fund deposits relating to
the Mahoning landfill facility. The Company continues to use a trust fund to
satisfy the financial assurance requirements for its East Liverpool landfill
facility. Therefore, in April 1996 the Company deposited approximately $.3
million into the trust fund to satisfy the current financial assurance
obligation for that facility. The Company will continue to review and update
the underlying assumptions used to estimate the total projected costs and
financial assurance requirements and, accordingly, such estimates will be
subject to periodic revision and adjustment at least annually.

Management believes that cash provided from operations, the availability of
working capital and the Company's unused portion of its revolving credit
facility as well as the Company's ability to incur additional indebtedness will
be for the foreseeable future sufficient to meet operating requirements, fund
debt repayments, fund present capital expenditure programs and provide for
financial assurance requirements of its disposal facilities.

Currently, the Company is not aggressively pursuing potential acquisition
candidates but will continue to consider acquisitions that make economic sense.
While the Company has not entered into any pending agreements for acquisitions,
it may do so at any time. Such potential acquisitions could be financed by
existing working capital, the use of the Company's existing credit facility,
secured or unsecured debt, issuance of common or preferred stock, or issuance of
a security with characteristics of both debt and equity, any of which could
impact liquidity in the future.

3
<PAGE>

Results of Operations

The Company's primary business segment provides integrated waste management and
environmental services which include the operation of nonhazardous solid waste
landfills for the disposal of special waste and municipal solid waste;
transportation of hazardous and nonhazardous waste; transportation and disposal
brokerage and management services; collection services; and environmental
engineering, site assessment, analytical laboratory and remediation services.
The Company, as part of its transportation operations, also operates a second
business segment: a common carrier of general and bulk commodities throughout
the United States and several provinces of Canada.

Performance in 1996 compared with 1995

Overall performance. Net operating revenues were $79 million in 1996 compared
with $83.7 million in 1995. Net income totaled $3.1 million or $.10 per share
compared with a net loss of $29.2 million or $.98 per share in 1995. During
1995, in accordance with the Company's asset impairment policy, the Company
performed an analysis for impairment of certain long-lived assets. As a result,
in 1995 the Company incurred significant charges for the write-down of assets
and the write-down of costs in excess of fair market value of net assets of
acquired businesses and other intangibles. In 1995, the Company also incurred
significant charges for closure and post-closure monitoring costs associated
with the Company's American and East Liverpool landfill facilities.

Segment performance. Segment performance should be read in conjunction with
Note 12 to the Consolidated Financial Statements.

Net operating revenues of the Company's primary business segment, integrated
waste management and environmental services declined 7% to $63.4 million in 1996
from $67.9 million in 1995. The Company's technical environmental services
business reported a modest increase in net operating revenues compared with the
prior year primarily as a result of increased remediation business. The net
operating revenues of the disposal operations, including disposal brokerage,
decreased in 1996 compared to 1995 primarily as a result of lower net operating
revenues of the disposal brokerage business and the Company's decision to
significantly curtail operations at its East Liverpool landfill facility in July
1996. Net operating revenues of the transportation and transportation related
operations declined significantly in 1996 compared with 1995 primarily due to
the closing of two transportation terminals resulting in decreased revenues
associated with the transportation of hazardous waste and, to a lesser extent,
the transportation of industrial waste.

As previously mentioned, the Company incurred significant charges in 1995 for
the write-down of assets, the write-down of costs in excess of fair market value
of net assets of acquired businesses and other intangibles and for closure and
post-closure monitoring costs. As a result, operating costs of the integrated
waste management and environmental services segment were significantly lower in
1996 than in 1995. Operating costs of this segment were 85% of net operating
revenues in 1996. Excluding the effects of the aforementioned charges,
operating costs would have been 92% of net operating revenues in 1995.
Operating costs of the transportation and transportation related operations
decreased as a percentage of net operating revenues primarily as a result of
lower depreciation and amortization expense and the closing of transportation
terminals which had high operating costs as a percentage of net operating
revenues. The disposal operations had lower operating costs in 1996 compared
with 1995 primarily due to lower closure and post-closure monitoring expense and
reduced depreciation and amortization expense as a

4
<PAGE>

result of obtaining an expansion permit in May 1996 for the Company's American
landfill facility and improved gross margins on the disposal brokerage business.
The technical environmental services business also had lower operating costs in
1996 compared with 1995 primarily as a result of decreased subcontractor costs
and decreased depreciation and amortization expense.

The integrated waste management and environmental services segment recorded
operating income of $9.4 million in 1996 compared with an operating loss of
$33.8 million in 1995. Excluding the effect of the aforementioned charges on
1995 operating income, the integrated waste management and environmental
services segment would have recorded operating income of $5.8 million in 1995.
The increase in operating income in 1996 is primarily the result of increased
operating income of the transportation and transportation related operations and
the technical environmental services business both of which incurred operating
losses in 1995.

The Company's second business segment, the transportation of general and bulk
commodities, recorded net operating revenues of $12.2 million in 1996 compared
with $12.6 million in 1995. This segment recorded operating income of $.6
million compared with an operating loss of $1.3 million in 1995. The increase
in operating income is primarily the result of decreased depreciation and
amortization expense in 1996 and the fact that 1995's operating results
included a $1.1 million charge relating to impaired assets.

Interest Expense. Interest expense declined significantly to $.2 million in
1996 compared to $1 million in 1995 primarily due to a reduction in the amount
of principal outstanding and lower weighted average interest rates. During 1996
and 1995 interest costs capitalized amounted to $.3 million and $1 million,
respectively.

General Corporate Expenses. General corporate expenses declined to $5.6 million
in 1996 compared to $6.2 million in 1995. In 1995 the Company incurred a $.8
million prepayment charge in connection with the prepayment of a senior secured
note prior to maturity.

Net Income (Loss). The Company recorded net income of $3.1 million in 1996
compared with a net loss of $29.2 million in 1995 primarily as a result of the
foregoing. The Company recorded a provision for income taxes of $1.8 million in
1996 compared to a benefit for income taxes of $9.8 million in 1995. The
Company's overall effective income tax rate, including the effect of state
income tax provisions, was 36% in 1996 and 23.6% in 1995. The 1995 overall
effective income tax rate was substantially lower than the statutory income tax
rates primarily because of the nondeductibility for tax purposes of the
amortization and write-down of costs in excess of fair market value of net
assets of acquired businesses.

Performance in 1995 compared with 1994

Overall Performance. Net operating revenues were $83.7 million in 1995 compared
with $88.8 million in 1994. The Company incurred a net loss of $29.2 million,
or $.98 per share in 1995 compared with $2 million of net income, or $.07 per
share in 1994. In 1995, in accordance with the Company's asset impairment
accounting policy, the Company performed an analysis for impairment of certain
long-lived assets. As described further in the following paragraphs and in Note
2 to the Consolidated Financial Statements, such analysis indicated that assets
were impaired at the Company's East Liverpool landfill facility, technical
environmental services businesses, and certain transportation operations.

In light of market conditions, regulatory requirements and other business
factors, in 1995 East Liverpool Landfill, Inc. ("ELLI") determined that the
significant capital investment necessary to develop this facility in the
foreseeable future was not economically justified.

5
<PAGE>

As a result of the decision in the fourth quarter of 1995 not to further
develop the facility, the East Liverpool landfill has very limited airspace
available for waste disposal and, therefore, the Company decided to
significantly reduce the quantity of waste accepted for disposal at this
facility. As a result, in accordance with the Company's asset impairment
accounting policy and Financial Accounting Standards Board Statement No. 121,
during the fourth quarter of 1995 the Company adjusted the carrying value of the
East Liverpool landfill assets to reflect the fair value of such assets,
resulting in an $11.7 million write-down. Furthermore, because the East
Liverpool landfill facility has very limited airspace available for waste
disposal, the Company accrued additional closure and post-closure monitoring
costs amounting to $6.8 million. Based upon the limited airspace available for
waste disposal, the Company also adjusted its contingent obligation to the City
of East Liverpool ("City") to reflect the Company's estimate of contingent
percentage gross disposal receipt payments and the future costs to be incurred
by the Company to provide free waste disposal to the City in accordance with its
agreement with the City. This adjustment resulted in the recognition of a gain
on the extinguishment of a portion of the aforementioned contingent obligation
which was accounted for as an extraordinary credit, net of tax, of $2.5 million.

In 1990, the Company acquired its technical environmental services businesses
and certain transportation operations. The amounts paid by the Company to
purchase these operations were based upon historical financial results, market
conditions and/or expectations at the time they were acquired. Significant
changes have occurred in the environmental industry over the last several years
and the financial performance of these operations had significantly deteriorated
since their acquisition as a result of, among other things, market conditions
and increased competition. Therefore, during 1995, in accordance with the
Company's asset impairment accounting policy, the Company evaluated the costs in
excess of fair market value of net assets of the technical services companies
and the transportation operations to determine if the carrying values of such
assets were recoverable.

The costs in excess of fair market value of net assets of the technical
services companies were not identified with any long-lived assets or intangibles
at the time of acquisition. Therefore, the Company evaluated the recoverability
of such costs in accordance with the Company's asset impairment accounting
policy and Accounting Principles Board Opinion No. 17 "Intangible Assets." To
ascertain whether a permanent impairment existed, the Company estimated the
undiscounted sum of the expected future after-tax operating income of the
technical services companies excluding amortization of costs in excess of fair
market value of net assets to determine if such sum was less than the carrying
value of such costs in excess of fair market value of net assets, which had a
remaining useful life of 20 years. The evaluation performed by the Company
indicated the existence of an impairment and the Company determined the fair
value and measured the extent of the impairment by discounting the expected
future after-tax operating income excluding amortization of costs in excess of
fair market value of net assets at the Company's incremental borrowing rate of
8.875%. The Company recorded an adjustment of $10.1 million to the carrying
value of such assets.

The recoverability of the costs in excess of fair market value of net assets
of the transportation operations was evaluated in accordance with the Company's
asset impairment accounting policy and Financial Accounting Standards Board
Statement No. 121, because these costs could be identified with long-lived
assets and other intangible assets. To ascertain if a permanent impairment
existed, the Company estimated the undiscounted sum of the expected future cash
flows of the identified assets to determine if such sum was less than the
carrying value of such identified assets. The evaluation performed by the
Company indicated the existence of an impairment and the Company measured the
extent of the impairment by determining the fair

6
<PAGE>

value of the long-lived assets based upon quoted market prices. As a result, the
Company recorded an adjustment to the carrying value of the costs in excess of
fair market value of net assets and other intangible assets of $2.2 million and
$.7 million, respectively.

In the third quarter of 1995, as a result of a resolution reached with the
Ohio EPA alleging violation of American Landfill, Inc.'s ("ALI") 1985 permit and
related regulations concerning its capacity, ALI incurred a charge of
approximately $9.2 million for closure and post-closure monitoring costs.

Segment performance. Segment performance should be read in conjunction with
Note 12 to the Consolidated Financial Statements.

Net operating revenues of the Company's primary business segment, integrated
waste management and environmental services declined 7% to $67.9 million in 1995
from $73.1 million in 1994. The Company's disposal operations reported
decreased net operating revenues in 1995 compared with 1994 as a result of a
decrease in disposal volumes and, to a lesser extent, a decrease in average
disposal prices. Net operating revenues of the disposal brokerage operations
improved due to an increase in the volume of business. Net operating revenues
of the transportation and transportation brokerage and management operations
were lower in 1995 than in 1994, reflecting a reduction in the level of
transportation services provided. The Company's technical environmental
services business reported a modest improvement in net operating revenues in
1995 compared with 1994 primarily as a result of increased subcontractor costs
charged to the customer with little or no markup, offset by a significant
decrease in revenues arising from time billings and, to a lesser extent,
laboratory services.

Operating costs for the integrated waste management and environmental services
segment were significantly higher in 1995 compared with 1994 primarily as a
result of the aforementioned charges relating to the impaired assets of the
Company's disposal, transportation and technical services businesses and the
adjustments recorded for closure and post-closure monitoring costs associated
with the Company's disposal operations. Excluding the effects of the
aforementioned charges, the operating costs of the integrated waste management
and environmental services segment were 92% of the segment's net operating
revenues in 1995 compared with 87% in 1994. Operating costs of the technical
environmental services businesses as well as the transportation and
transportation related operations increased in 1995 compared to 1994. The
increase in the technical environmental services business operating costs was
primarily as a result of increased subcontractor costs. The increase in
operating costs as a percentage of net operating revenues for the transportation
and transportation related operations was primarily a result of decreased net
operating revenues as well as the result of a liability recorded by one of the
transportation companies having been identified as a potentially responsible
party relating to a hazardous waste disposal facility as more fully described in
Note 9 to the Consolidated Financial Statements. Operating costs of the
disposal operations decreased primarily as a result of lower amortization costs
associated with the landfill operations. Operating costs of disposal brokerage
operations increased primarily due to the increased level of business of the
disposal brokerage operations.

The integrated waste management and environmental services segment incurred an
operating loss of $33.8 million in 1995 compared with operating income of $9.3
million in 1994 primarily as a result of the aforementioned charges and
decreased net operating revenues. Excluding the effects of the aforementioned
charges in 1995, the integrated waste management and environmental services
segment would have recorded operating income of $5.8 million. The decrease from
$9.3 million in 1994 to $5.8 million in 1995 was primarily the result of the
transportation and technical environmental services operations incurring
operating losses in 1995, partially offset by increased operating income of the
disposal and disposal brokerage operations.

7
<PAGE>

The Company's second business segment, the transportation of general and bulk
commodities, recorded net operating revenues of $12.6 million in 1995 compared
with $12.9 million in 1994. This segment incurred an operating loss of $1.3
million in 1995 compared with operating income of $.5 million in 1994. The
decrease is primarily the result of increased operating costs in 1995 including
$1.1 million relating to the charges for impaired assets as described above.

Interest expense and amortization of debt discount. Interest expense and
amortization of debt discount declined slightly to $1 million in 1995 compared
with $1.1 million in 1994 primarily due to a reduction in the amount of
principal outstanding. During 1995 and 1994 interests costs capitalized
amounted to $1 million and $1.5 million, respectively.

General corporate expenses. General corporate expenses increased to $6.2
million in 1995 compared with $5.7 million in 1994 primarily as a result of a
$.8 million prepayment charge in connection with the prepayment of a senior
secured note prior to maturity as more fully described in Note 4 to the
Consolidated Financial Statements.

Net income (loss). A net loss of $29.2 million was incurred in 1995 as compared
with net income of $2 million in 1994 primarily as a result of the foregoing.
The Company recorded a benefit for income taxes of $9.8 million in 1995 compared
to an expense provision of $1.7 million in 1994. The Company's overall
effective income tax rate, including the effect of state income tax provisions,
was 23.6% in 1995 and 45.2% in 1994. The 1995 overall effective income tax rate
was substantially lower than the statutory income tax rates primarily because of
the nondeductibility for tax purposes of the amortization and write-down of
costs in excess of fair market value of net assets.

Trends and uncertainties

In the ordinary course of conducting its business, the Company becomes involved
in lawsuits, administrative proceedings and governmental investigations,
including those relating to environmental matters. Some of these proceedings
may result in fines, penalties or judgments being assessed against the Company
which, from time to time, may have an impact on its business and financial
condition.

The Company is subject to extensive and evolving environmental laws and
regulations that have been enacted in response to technological advances and the
public's increased concern over environmental issues. As a result, the Company
believes that costs associated with the engineering, construction, ownership and
operation of landfills will increase in the future. Competitive factors may
require the Company to absorb all or a portion of these increased expenses.

The federal government as well as numerous states and local governmental
bodies are increasingly considering, proposing or enacting legislation to either
restrict or impede disposal and/or transportation of waste. A significant
portion of the Company's disposal and transportation revenues are derived from
the disposal or transportation of out-of-state waste. All of the Company's
landfills are located within the State of Ohio. Any regulation restricting or
impeding the transportation of waste, the acceptance of out-of-state waste for
disposal, or which levies significant taxes on the disposal of waste could have
a significant negative effect on the Company.

Competitive pressures within the environmental industry continue to impact the
financial performance of the Company's disposal, transportation and technical
environmental services operations. Increases in additional disposal capacity
within the industry and aggressive pricing strategies of certain competitors
could result in further declines in disposal rates and/or disposal volumes
thereby affecting the Company's financial performance. Additionally, a further
decline

8
<PAGE>

in the rates which customers are willing to pay for its technical environmental
and transportation services could impact the future financial performance of the
Company's operations.

During the third quarter of 1996, the Company, through newly organized
subsidiaries, started commercial collection operations with the intent to begin
residential collection in the future. The Company initially intends to target
the local markets in which the Company's American and Mahoning landfills are
located.

The Company recently completed the construction of a landfill gas extraction
facility at its American landfill and began production in September 1996. In
November 1996 the Company entered into a contract for the sale of all of the
landfill gas, the principal component of which is methane. The production and
sale of the landfill gas is expected to entitle the Company to qualify for tax
credits from the production of fuel from a nonconventional source. These tax
credits, which under current legislation expire at the end of 2007, could
significantly reduce the Company's overall effective tax rate.

As a result of East Liverpool Landfill, Inc.'s ("ELLI") previously disclosed
decision not to further develop its facility, the East Liverpool landfill has
very limited airspace available for waste disposal, and effective July 1, 1996,
ELLI significantly reduced the quantity of waste accepted for disposal.

During the fourth quarter of 1996, the Company's remediation business began
experiencing operating losses. Such losses have significantly increased during
the first quarter of 1997 primarily as a result of inefficiencies and delays
occurring at a remediation project in Denver, Colorado. These operating losses
will adversely affect the Company's first quarter financial results.
Furthermore, as more fully described below, the Company is currently in a
dispute regarding this remediation project.

In March 1996, the Company entered into an agreement with a customer to
provide certain remediation related services at a site in Denver, Colorado. The
volume of contaminated materials actually requiring remediation has greatly
exceeded the amount originally estimated and the agreement provides for payment
to the Company for such additional volume. The customer has refused to make
further payments to the Company. On February 14, 1997, the Company filed a
demand for arbitration against the customer, claiming, among other things, that
the customer has materially breached the agreement. Furthermore, the Company
has requested financial assurances from the customer of its ability to pay
amounts that are now and will be due and owing to the Company under the
agreement. The agreement provides, among other things, that the Company shall
not cease work pending the arbitration award but shall proceed with all work,
including work that is the subject of the dispute submitted to arbitration. The
Company has requested an expedited hearing claiming that the Company will be
severely prejudiced if it is required to continue to work at the site without
adequate assurance that it will be paid. On March 21, 1997 the Company was
advised that another contractor had been selected to complete the project.
Failure to resolve the pending dispute in favor of the Company could have a
material adverse effect on the Company's future financial results.

Inflation impact

The Company has not entered into any long-term fixed price contracts which could
adversely impact financial performance in periods of inflation. In general,
management believes that rising costs resulting from price inflation could be
passed on to customers; however, the Company may need to absorb all or a portion
of these cost increases until current competitive conditions ease. During the
three years ended December 31, 1996, management believes inflationary pressures
did not significantly impact the Company's financial performance.

9
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Balance Sheets

(in thousands, except for shares)

<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
-------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents..................................................... $ 4,286 $ 5,186
Accounts receivable, less allowance for
doubtful accounts of $506 in 1996 and $778 in 1995........................... 14,510 14,481
Refundable income taxes....................................................... -- 5,519
Current deferred tax benefit (Note 5)......................................... 197 191
Prepaid expenses and other current assets..................................... 3,019 2,931
-------------------
Total current assets...................................................... 22,012 28,308
Property and equipment, net (Notes 2, 3 and 4).................................. 89,637 78,636
Deposits (Note 10).............................................................. 2,314 5,117
Costs in excess of fair market value of net assets of acquired businesses, net
(Notes 1 and 2)................................................................ 3,193 3,365
Other assets, net (Notes 1 and 2)............................................... 307 310
-------------------
Total assets.............................................................. $117,463 $115,736
-------------------
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt (Notes 2 and 4)............................. $ 305 $ 358
Accounts payable.............................................................. 8,495 5,970
Accrued payroll and other compensation........................................ 1,076 920
Accrued income taxes.......................................................... 315 166
Other accrued taxes........................................................... 2,127 1,804
Other liabilities and accrued expenses (Notes 1 and 6)........................ 3,411 2,959
-------------------
Total current liabilities................................................. 15,729 12,177
Long-term debt (Notes 2 and 4).................................................. 3,836 8,748
Deferred income taxes (Note 5).................................................. 7,757 6,559
Accrued closure costs and post-closure monitoring costs (Notes 1, 2 and 10)..... 16,932 18,519
Other noncurrent liabilities (Note 2)........................................... 2,277 2,488
Contingencies and Commitments (Notes 9, 10 and 11):
Shareholders' Equity (Notes 6, 7 and 8):
Preferred Stock, no par value; authorized 2,000,000 shares;
no shares issued or outstanding.............................................. -- --
Class A Common Stock, no par value, one vote per share; authorized
70,000,000 shares; issued 25,015,615 shares at December 31, 1996
and 24,784,466 shares at December 31, 1995................................... 63,702 63,136
Class B Common Stock, no par value, ten votes per share; authorized
30,000,000 shares; issued 5,165,569 shares at December 31, 1996
and 5,170,844 shares at December 31, 1995.................................... 780 781
Retained earnings............................................................. 6,630 3,508
Treasury Stock, Class B Common Stock, at cost................................. (180) (180)
-------------------
Total shareholders' equity............................................... 70,932 67,245
-------------------
Total liabilities and shareholders' equity............................... $117,463 $115,736
-------------------
</TABLE>
See accompanying notes to consolidated financial statements.

10
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Operations

(in thousands, except for per share amounts)

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995 1994
----------------------------------
<S> <C> <C> <C>
Net operating revenues.......................................................... $ 79,024 $ 83,700 $ 88,779

Cost and expenses:
Cost of operations............................................................ 63,269 71,754 71,510
Closure and post-closure monitoring costs (Notes 2 and 10).................... 591 17,124 1,223
Write-down of costs in excess of fair market value of net assets
of acquired businesses and other intangibles (Note 2)........................ -- 13,020 --
Write-down of assets (Note 2)................................................. -- 11,685 --
Selling, general and administrative expense................................... 10,688 10,421 11,707
----------------------------------
Income (loss) from operations................................................... 4,476 (40,304) 4,339

Other income (expense):
Interest expense (Note 4)..................................................... (223) (974) (839)
Amortization of debt discount (Note 2)........................................ -- -- (289)
Interest income............................................................... 390 665 450
Other income (expense), net (Note 4).......................................... 236 (940) 59
----------------------------------
Income (loss) before income taxes and extraordinary credit...................... 4,879 (41,553) 3,720

Provision (benefit) for income taxes (Note 5):
Current....................................................................... 565 (4,742) 1,412
Deferred...................................................................... 1,192 (5,081) 268
----------------------------------
1,757 (9,823) 1,680
----------------------------------
Income (loss) before extraordinary credit....................................... 3,122 (31,730) 2,040

Extraordinary credit, net of tax (Note 2)....................................... -- 2,489 --
----------------------------------
Net income (loss)............................................................... $ 3,122 $(29,241) $ 2,040
----------------------------------
Net income (loss) per share before extraordinary credit......................... $.10 $(1.06) $.07

Extraordinary credit per share.................................................. -- .08 --
----------------------------------
Net income (loss) per share..................................................... $.10 $(.98) $.07
----------------------------------
Weighted average shares outstanding (Note 1).................................... 30,236 29,982 29,888
----------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.

11
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows

(in thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995 1994
----------------------------------
<S> <C> <C> <C>
Operating activities:
Net income (loss)............................................................. $ 3,122 $(29,241) $ 2,040
Reconciliation of net income to cash provided by operating activities:
Extraordinary credit........................................................ -- (2,489) --
Depreciation and amortization............................................... 6,975 8,561 10,906
Closure and post-closure monitoring costs................................... 591 17,124 1,223
Write-down of costs in excess of fair market value of net assets
of acquired businesses and other intangibles............................... -- 13,020 --
Write-down of assets........................................................ -- 11,685 --
Amortization of debt discount............................................... -- -- 289
Provision (benefit) for deferred income taxes............................... 1,192 (5,081) 268
Provision for losses on accounts receivable................................. (85) 610 1,007
(Gain) loss on sales of fixed assets........................................ (103) 302 57
Change in assets and liabilities excluding the
effects of business acquisitions:
(Increase) decrease in accounts receivable................................. 56 5,825 (5,022)
(Increase) decrease in refundable taxes.................................... 5,519 (5,363) (60)
(Increase) decrease in prepaid expenses and other current assets........... (88) (759) 1,190
(Increase) decrease in other assets........................................ (37) 5 (133)
Increase in accounts payable............................................... 2,525 855 555
Increase (decrease) in accrued payroll and other compensation.............. 156 (683) 2
Increase in accrued income taxes........................................... 149 2 128
Increase (decrease) in other accrued taxes................................. 323 576 (5)
Increase (decrease) in other liabilities and accrued expenses.............. 1,016 (417) (638)
Decrease in accrued closure costs and post-closure
monitoring costs........................................................ (2,178) -- --
Increase (decrease) in other noncurrent liabilities........................ (211) 623 --
----------------------------------
Net cash provided by operating activities............................... 18,922 15,155 11,807
----------------------------------
Investing activities:
Capital expenditures.......................................................... (18,754) (11,032) (6,224)
Business acquisitions, net of cash acquired................................... -- -- (87)
Proceeds from sales of fixed assets........................................... 1,094 86 276
(Increase) decrease in deposits, net.......................................... 2,803 920 (866)
----------------------------------
Net cash used in investing activities................................... (14,857) (10,026) (6,901)
----------------------------------
Financing activities:
Proceeds from sale of common stock............................................ -- 6 --
Proceeds from issuance of long-term debt...................................... 3,100 9,831 102
Repayments of long-term debt.................................................. (8,065) (17,127) (4,128)
----------------------------------
Net cash used in financing activities................................... (4,965) (7,290) (4,026)
----------------------------------
Increase (decrease) in cash and cash equivalents................................ (900) (2,161) 880
Cash and cash equivalents at beginning of year.................................. 5,186 7,347 6,467
----------------------------------
Cash and cash equivalents at end of year........................................ $ 4,286 $ 5,186 $ 7,347
----------------------------------

</TABLE>

For supplemental disclosures of cash flow information and non-cash investing
and financing activities, see Notes 1, 2, 5 and 6.

See accompanying notes to consolidated financial statements.

12
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity
(in thousands)

<TABLE>
<CAPTION>
For The Three Years Ended December 31, 1996
------------------------------------------------------------------
Class B
Shares Common Stock Treasury Stock
---------------- ---------------- Retained ---------------
Class A Class B Class A Class B Earnings Shares Cost
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994. 23,551 6,173 $62,346 $ 967 $ 30,709 39 $180
Stock contributed to
401(k) plan
(Note 6)................ 228 -- 598 -- -- -- --
Conversion of shares by
shareholders
(Note 8)................ 691 (691) 129 (129) -- -- --
Net income............... -- -- -- -- 2,040 -- --
------------------------------------------------------------------
Balance at December 31,
1994...................... 24,470 5,482 63,073 838 32,749 39 180
Exercise of stock options
(Note 7)............... 3 -- 6 -- -- -- --
Conversion of shares by
shareholders
(Note 8)................ 311 (311) 57 (57) -- -- --
Net loss................. -- -- -- -- (29,241) -- --
------------------------------------------------------------------
Balance at December 31,
1995...................... 24,784 5,171 63,136 781 3,508 39 180
Stock Contributed to
401(k) plan
(Note 6)............... 226 -- 565 -- -- -- --
Conversion of shares by
shareholders
(Note 8)............... 5 (5) 1 (1) -- -- --
Net income............... -- -- -- -- 3,122 -- --
------------------------------------------------------------------
Balance at December 31,
1996...................... 25,015 5,166 $63,702 $ 780 $ 6,630 39 $180
------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

13
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

The significant accounting policies of American Waste Services, Inc. and its
subsidiaries (collectively the "Company" or "AWS"), which are summarized below,
are consistent with generally accepted accounting principles and reflect
practices appropriate to the businesses in which they operate. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Certain prior year amounts have been reclassified
to be consistent with the 1996 presentations.

Principles of consolidation

The consolidated financial statements include the accounts of American Waste
Services, Inc. and all wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents

Cash and cash equivalents include money market instruments and other highly
liquid investments that are stated at cost which approximates market value.
Such investments, which mature in three months or less from date of purchase,
are considered to be cash equivalents for purposes of the consolidated
statements of cash flows. The balance of such short-term investments was
$2,016,000 and $3,627,000 at December 31, 1996 and 1995, respectively.

Financial instruments

The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximated fair value at
December 31, 1996 and 1995 because of the relatively short maturity of these
instruments.

Property and equipment

Disposal sites include the cost of acquisitions in addition to engineering,
permitting and certain preparation costs related to disposal sites in operation.
These costs are amortized as disposal capacity is used which is based on
engineering estimates of remaining available airspace. Engineering, legal and
other costs associated with the expansion of capacity of existing sites are
deferred until receipt of all necessary operating permits. Such costs are
capitalized and amortized after receipt of the necessary operating permits.
Disposal site improvements are capitalized and amortized using the straight-line
method over the estimated useful life of the asset which varies from 5 to 20
years. All other property and equipment is stated at cost and depreciated using
the straight-line method over the estimated useful life of the asset which
varies from 5 to 50 years in the case of buildings and improvements and from 3
to 15 years in the case of all other property and equipment.

Major additions and improvements are charged to the property and equipment
accounts while replacements, maintenance and repairs which do not improve or
extend the life of the respective asset are expensed currently. The cost of
assets retired or otherwise disposed of and the related accumulated depreciation
is eliminated from the accounts in the year of disposal. Gains or losses
resulting from disposals of property and equipment are credited or charged to
operations currently. Interest costs are capitalized on significant projects of
landfill development or expansion and other construction (see Note 4).

Closure costs and post-closure monitoring costs

Disposal site closure costs and post-closure monitoring costs are estimated
based on currently available facts, existing technology and presently enacted
laws and regulations. Such costs are accrued over the estimated life of the
related disposal site as disposal capacity is utilized based on engineering
estimates of remaining available airspace. Upon the effective date of the
federal "Subtitle (D) Regulations," October 9, 1993, the Company began accruing
estimated closure costs and post-closure monitoring costs. Closure costs and
post-closure monitoring costs charged to operations were $591,000 in 1996,
$17,124,000 in 1995, and $1,223,000 in 1994. The balance of accrued closure and
post-closure monitoring costs at December 31, 1996 was $18,199,000 of which
$1,267,000 is included in "Other current liabilities" and $16,932,000 is
included in "Accrued closure costs and post-closure monitoring costs." At
December 31, 1995 the balance was $18,519,000, all of which was included in
"Accrued closure costs and post-closure

14
<PAGE>

monitoring costs." As a result of an agreement between American Landfill, Inc.
and the Ohio Environmental Protection Agency ("Ohio EPA") and an asset
impairment at the East Liverpool landfill facility, the Company incurred
significant adjustments for closure and post-closure monitoring costs in 1995
(see Notes 2 and 10).

Costs in excess of fair market value of net assets of acquired businesses

The costs in excess of fair market value of net assets of acquired businesses is
amortized on a straight-line basis over 25 years. Amortization of these costs
was $172,000 in 1996 and $798,000 in 1995 and 1994. Accumulated amortization at
December 31, 1996 and 1995 was $4,453,000 and $4,281,000, respectively. During
the fourth quarter of 1995 in accordance with the Company's asset impairment
accounting policy, a portion of the costs in excess of fair market value of net
assets of acquired businesses was written off (see Note 2).

Other intangible assets

Included in the balance of "Other assets, net" are other intangible assets of
$163,000 and $177,000 at December 31, 1996 and 1995, respectively. Other
intangible assets consist primarily of a coal mining permit for the Company's
American landfill facility. The permit is amortized as the coal is mined
during construction of the landfill facility and is based upon engineering
estimates of remaining coal reserves. In 1995 other intangible assets consisted
primarily of the cost of intrastate operating authorities related to
transportation operations which were being amortized on a straight-line basis
principally over periods not exceeding 25 years. In the fourth quarter of 1995
the intrastate operating authorities relating to the transportation operations
were written off (see Note 2). Amortization of other intangible assets in 1996,
1995 and 1994 was $41,000, $65,000 and $84,000, respectively.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

Revenue recognition

The Company recognizes revenue for waste disposal services when the waste is
accepted at the landfill sites and revenue related to transportation services is
recognized on the date of delivery. Revenue for collection and technical
services, excluding laboratory services, is recognized as services are
performed, while revenue for laboratory services is recognized when the service
is completed. On contracts where the percentage-of-completion method is used,
revenue is recognized for a portion of the total contract revenue, in the
proportion that costs incurred bear to management's estimate of total contract
costs to be incurred, commencing when progress reaches a point where experience
is sufficient to estimate final results with reasonable accuracy. Earnings and
costs on contracts are subject to revision throughout the terms of the contract,
and any required revisions are made in the periods in which revisions become
known. Provision is made for the full amount of anticipated losses in the
period in which they are determinable.

Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenues recognized on contracts for which billings will be presented
in accordance with contract provisions. Such revenues are generally expected to
be billed and collected within one year.

Net income (loss) per share

Class A Common Stock and Class B Common Stock are considered as one class of
stock for the calculation of net income (loss) per share. All per share data
has been computed using the weighted average number of common and common
equivalent shares outstanding each year which amounted to 30,236,000, 29,982,000
and 29,888,000 in 1996, 1995 and 1994, respectively. Common equivalent shares,
which represent shares issuable upon the exercise of outstanding stock options,
were 129,000, 67,000 and -0- in 1996, 1995 and 1994, respectively.

Asset impairments

In the fourth quarter of 1995, the Company adopted Financial Accounting
Standards Board Statement No. 121 entitled "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" which was not
significantly different from the Company's previous asset impairment accounting

15
<PAGE>

policy. The Company periodically reviews the carrying value of certain of its
assets in relation to historical results, current business conditions and trends
to identify potential situations in which the carrying value of assets may not
be recoverable. If such reviews indicate that the carrying value of such assets
may not be recoverable, the Company would estimate the undiscounted sum of the
expected future cash flows of such assets to determine if such sum is less than
the carrying value of such assets to ascertain if a permanent impairment exists.
If a permanent impairment exists, the Company would determine the fair value by
using quoted market prices, if available, for such assets, or if quoted market
prices are not available, the Company would discount the expected future cash
flows of such assets.

Impact of new accounting requirements

On October 23, 1995, the Financial Accounting Standards Board issued FAS No.
123, "Accounting for Stock-Based Compensation," which is effective for financial
statements for fiscal years beginning after December 15, 1995. Statement No.
123 provides a fair value method of accounting for stock-based compensation
arrangements rather than the intrinsic value based method contained in APB
Opinion No. 25. The Statement does not require an entity to adopt the new fair
value based method for purposes of preparing its basic financial statements.
Entities that retain the APB Opinion No. 25 method of accounting are required to
display in the footnotes pro forma net income and earnings per share information
as if the fair value based method had been adopted. The Company did not adopt
the fair value method provided in Statement No. 123.

The Company performed an analysis under the fair value method of accounting
for stock-based compensation arrangements and has determined that the stock-
based compensation would be immaterial to the consolidated financial statements
of the Company. Therefore, no pro forma information is presented.

Note 2. Impairment of Long-lived Assets

In 1995, in accordance with the Company's asset impairment accounting policy,
the Company performed an analysis for impairment of certain long-lived assets.
As described further in the following paragraphs, such evaluation indicated
asset impairments at the Company's East Liverpool landfill facility, technical
environmental services businesses, and transportation operations.

On February 2, 1990, East Liverpool Landfill, Inc. ("ELLI"), a wholly owned
subsidiary of the Company, entered into an agreement with the City of East
Liverpool, Ohio, ("City") to manage and operate the City's landfill facility.
ELLI also entered into an agreement with the City to purchase its landfill
facility for $1,043,000 in cash, to provide $1,000,000 in cash to the City for
improvements, provide up to 700 tons of free waste disposal per month, and to
make minimum disposal fee payments of $600,000 per year to the City for a period
of 20 years if ELLI was successful in being granted a new permit by the Ohio
Environmental Protection Agency. On March 1, 1993, the Ohio Environmental
Protection Agency granted a permit to upgrade the facility in accordance with
Ohio's "best available technology" standards and the acquisition of the East
Liverpool landfill facility was then consummated on March 3, 1993. This
acquisition was accounted for using the purchase method of accounting. The
present value of the minimum annual disposal fee payments, determined using a
discount rate of 8%, totaled $5,891,000 and had been recorded as a long-term
debt as of the date of acquisition. The purchase price of the facility, which
included the liability for minimum annual disposal fee payments and other
liabilities of $162,000, totaled $8,250,000 and was allocated to property and
equipment.

On June 29, 1994, the City filed an action against ELLI in the Court of Common
Pleas, Columbiana County, Ohio, relating to the agreement regarding the sale and
purchase of the East Liverpool landfill entered into by the City and ELLI on
February 2, 1990 (the "Agreement").

On August 29, 1994, ELLI entered into an Agreed Judgment Entry of
Consolidation, Settlement and Dismissal (the "Entry") with the City and others.
The Entry modified certain terms of the Agreement. The Entry obligated the
Company to provide up to 700 tons of free waste disposal at either its American
landfill facility or Mahoning landfill facility should the East Liverpool
facility stop accepting waste, and eliminated the requirement for ELLI to make a
minimum annual payment of $600,000 per year to the City. The Entry further
provided that ELLI will continue to pay the City 17% of gross disposal receipts
until March 1, 1998 and 18% of gross disposal receipts for the remaining 15-year
term of the Agreement. The Company was unable to estimate the amount of
contingent percentage gross disposal receipt payments that would be made to the
City during the term of the Agreement. Accordingly, the Company reclassified
the remaining liability recorded at the date of acquisition from long-term debt
to other noncurrent liabilities.

In light of market conditions, regulatory requirements and other business
factors, in 1995 ELLI determined that the significant capital investment
necessary to

16
<PAGE>

develop this facility in the foreseeable future was not economically justified.

As a result of the decision in the fourth quarter of 1995 not to further
develop the facility, the East Liverpool landfill has very limited airspace
available for waste disposal. Therefore, the Company decided to significantly
reduce the quantity of waste accepted for disposal at this facility. As a
result, in accordance with the Company's asset impairment accounting policy and
Financial Accounting Standards Board Statement No. 121, the Company determined
that the assets of the East Liverpool landfill were impaired. Accordingly, in
the fourth quarter of 1995, the Company adjusted the carrying value of the East
Liverpool landfill to reflect the fair value of such assets resulting in an
$11,685,000 write-down. Such amount is included in the Consolidated Statements
of Operations for 1995 under the caption "Write-down of assets." Furthermore,
because the East Liverpool landfill facility has very limited airspace available
for waste disposal, in the fourth quarter of 1995, the Company accrued
additional closure and post-closure monitoring costs amounting to $6,821,000.
This charge is included under the caption "Closure and Post-closure Monitoring
Costs" on the Consolidated Statements of Operations for 1995. Based upon the
limited airspace available for waste disposal, the Company also adjusted its
contingent obligation to the City of East Liverpool, as described above, to
reflect the Company's estimate of contingent percentage gross disposal receipt
payments and the future costs to be incurred by the Company to provide free
waste disposal to the City in accordance with its agreement with the City. This
adjustment resulted in the recognition of a gain on the extinguishment of a
portion of the aforementioned contingent obligation which was accounted for as
an extraordinary credit, net of tax, of $2,489,000 in 1995. Such contingent
noncurrent liability at December 31, 1996 and December 31, 1995 amounted to
$1,336,000 and $1,548,000, respectively. Future percentage gross disposal
receipt payments and the free waste disposal provided to the City will reduce
the carrying amount of such contingent noncurrent liability.

In 1990, the Company acquired its technical environmental services businesses
and certain transportation operations. The amounts paid by the Company to
purchase these operations were based upon historical financial results, market
conditions and/or expectations at the time they were acquired. Significant
changes have occurred in the environmental industry over the last number of
years and the financial performance of these operations had significantly
deteriorated since their acquisition as a result of, among other things, market
conditions and increased competition. During 1995, in accordance with the
Company's asset impairment accounting policy, the Company evaluated the costs in
excess of fair market value of net assets of the technical services companies
and the transportation operations to determine if the carrying values of such
assets were recoverable.

The costs in excess of fair market value of net assets of the technical
services companies were not identified with any long-lived assets or intangibles
at the time of acquisition. Therefore, the Company evaluated the recoverability
of such costs in accordance with the Company's asset impairment accounting
policy and Accounting Principles Board Opinion No. 17 "Intangible Assets." To
ascertain whether a permanent impairment existed, the Company estimated the
undiscounted sum of the expected future after-tax operating income of the
technical services companies excluding amortization of costs in excess of fair
market value of net assets to determine if such sum was less than the carrying
value of such costs in excess of fair market value of net assets, which had a
remaining useful life of 20 years. The evaluation performed by the Company
indicated the existence of an impairment and the Company determined the fair
value and measured the extent of the impairment by discounting the expected
future after-tax operating income excluding amortization of costs in excess of
fair market value of net assets at the Company's incremental borrowing rate of
8.875%. As a result, in the fourth quarter of 1995 the Company recorded an
adjustment of $10,106,000 to the carrying value of the costs in excess of fair
market value of net assets. The adjustment is included in the Consolidated
Statements of Operations for 1995 under the caption "Write-down of costs in
excess of fair market value of net assets of acquired businesses and other
intangibles."

17
<PAGE>

Company recorded an adjustment to the carrying value of the costs in excess
of fair market value of net assets and other intangible assets of $2,194,000 and
$720,000, respectively. The adjustments are included in the Consolidated
Statements of Operations for 1995 under the caption "Write-down of costs in
excess of fair market value of net assets of acquired businesses and other
intangibles."

Note 3. Property and Equipment

Property and equipment at December 31, 1996 and 1995 consist of the following
(in thousands)(see Note 2:

1996 1995
------------------
<S> <C> <C>
Land and land improvements.................................................. $ 8,452 $ 8,448
Disposal sites and improvements............................................. 66,781 52,256
Buildings and improvements.................................................. 15,143 14,588
Machinery and equipment..................................................... 15,385 14,227
Transportation equipment
and vehicles.............................................................. 13,051 12,781
Office furniture and equipment.............................................. 5,014 4,639
Construction in progress.................................................... 11,570 12,588
------------------
135,396 119,527
Less accumulated depreciation
and amortization.......................................................... 45,759 40,891
------------------
Property and equipment, net................................................. $ 89,637 $ 78,636
------------------
</TABLE>

Note 4. Debt
Long-term debt at December 31, 1996 and 1995 is as follows (in thousands):

<TABLE>
<CAPTION>
1996 1995
------------------
<S> <C> <C>
Unsecured revolving credit facility and term
loan agreement, with interest at prime
at December 31, 1996 and 3/8% above
prime at December 31, 1995................................................ $ 2,600 $ 7,115
Equipment loans secured by certain
transportation equipment, payable
monthly through August 1998, with
interest at 8.8%.......................................................... 324 650
Variable rate loan collateralized by mortgage
on golf course property, payable monthly
through March 2008, with interest rate
ceiling of 8% until March 1998 and
9.5% thereafter........................................................... 1,217 1,323
Capital leases and other notes payable...................................... -- 18
------------------
Total long-term debt........................................................ 4,141 9,106
Less current portion........................................................ 305 358
------------------
$ 3,836 $ 8,748
------------------
</TABLE>

Aggregate annual maturities of the long-term debt total $305,000, $230,000,
$106,000, $106,000, and $903,000 for the years 1997 through 2001, respectively.

Borrowings under the amended agreement bear interest at prime or, at the
Company's option, at a fixed rate above the Eurodollar rate. The agreement
provides for an annual fee of 3/8% on the unused portion of the facility and
requires the Company to maintain certain financial ratios. The amount of
borrowings outstanding under the revolving credit facility at December 31, 1996
and December 31, 1995 was $2,600,000 and $7,115,000, respectively, and the
weighted average interest rate was 8.25% at December 31, 1996. In December 1995
the Company used the unsecured revolving credit facility to prepay a senior
secured note prior to its stated maturity. In doing so, the Company incurred a
prepayment charge of approximately $750,000. Such amount is included in the
Consolidated Statements of Operations for 1995 under the caption "Other income
(expense), net." The Company also had $8 million and $-0- in outstanding
letters of credit at December 31, 1996 and December 31, 1995, respectively. The
letters of credit were utilized to capitalize a captive insurance company,
incorporated and licensed under the laws of the State of Vermont, which issued
an insurance policy to provide the required financial assurances for closure and
post-closure monitoring costs to the State of Ohio for the Company's American
and Mahoning landfill facilities.

During August 1995, a subsidiary of the Company borrowed $1,350,000 from a
bank to refinance a previous loan and to finance the construction of a banquet
facility. Proceeds from the new loan were used to repay the remaining unpaid
principal balance of the previous loan which was approximately $850,000. The
new loan is repayable in equal monthly installments over an initial term of
12.75 years and provides for interest at a variable rate of 3/4% over the bank's
prime rate with an interest rate ceiling of 8% per annum until March 22, 1998.
Thereafter, the maximum interest rate will be 9.5% per annum. The golf course
property together with the pro shop, restaurant facility and banquet facility
serve as collateral securing repayment of this indebtedness.

Interest costs related to significant projects of landfill development or
expansion and other construction are capitalized. Interest costs capitalized
totaled $313,000, $1,029,000 and $1,524,000 in 1996, 1995 and

18
<PAGE>

1994, respectively. Total interest costs and amortization of debt discount
incurred by the Company totaled $536,000, $2,003,000 and $2,652,000 in 1996,
1995 and 1994, respectively. Interest payments in 1996, 1995 and 1994 were
$459,000, $2,056,000 and $2,383,000, respectively.

Note 5. Income Taxes

Income (loss) before income taxes for each of the three years ended December
31, 1996 was subject to taxation under United States jurisdictions only.

Total income tax expense (benefit) for the year ended December 31, 1995 was
allocated as follows:

<TABLE>
<S> <C>
Income (loss) from continuing operations............................................ $(9,823)
Extraordinary item.................................................................. 1,339
-------
$(8,484)
-------
</TABLE>
The provisions (benefits) for income taxes charged to operations consist of the
following (in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
--------------------------
<S> <C> <C> <C>
Current:
Federal............................................................................. 438 $(4,814) $1,185
State............................................................................... 127 72 227
--------------------------
565 (4,742) 1,412
--------------------------
Deferred:
Federal............................................................................. 1,208 (4,699) 334
State............................................................................... (16) (382) (66)
--------------------------
1,192 (5,081) 268
--------------------------
1,757 $(9,823) $1,680
--------------------------
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax (assets) liabilities at December 31, 1996 and 1995
are as follows (in thousands):

1996 1995
-----------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts........ $ (131) $ (243)
Reserves not deductible until paid....... (564) (444)
Net operating loss carry-forwards........ (101) (1,016)
Alternative minimum tax credit
carry-forwards......................... (181) (372)
Other.................................... (21) (72)
-----------------
Gross deferred tax assets................ (998) (2,147)
Less valuation allowance................. 75 75
-----------------
Net deferred tax assets.................. $ (923) $(2,072)
-----------------
Deferred tax liabilities:
Property and equipment................... $8,466 $ 8,298
Other.................................... 17 142
-----------------
Gross deferred tax liabilities........... 8,483 8,440
-----------------
Net deferred tax liability............... $7,560 $ 6,368
-----------------
</TABLE>

The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory federal income
tax rate to income (loss) before income taxes as a result of the following
differences (in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
---------------------------
<S> <C> <C> <C>
Income (loss) before income taxes
and extraordinary credit.......... $4,879 $(41,553) $3,720
Federal statutory tax rate.......... 35% 35% 35%
---------------------------
1,708 (14,544) 1,302
State income taxes, net of federal
income tax benefits............... 72 (250) 105
Nondeductible amortization
and depreciation.................. 60 4,584 279
Change in the valuation
allowance for deferred tax
assets allocated to income
tax expense....................... -- 75 --
Nonconventional fuel production
tax credits....................... (83) -- --
Other, net.......................... -- 312 (6)
---------------------------
$1,757 $ (9,823) $1,680
---------------------------
</TABLE>

The Company received income tax refunds, net of payments, of $5,102,000 in
1996. The Company made income tax payments of $599,000 and $1,427,000 in 1995
and 1994, respectively.

Note 6. Retirement Benefits

The Company sponsors a defined contribution profit sharing plan that is a
qualified tax deferred benefit plan under Section 401(k) of the Internal Revenue
Code (the "Plan"). Substantially all employees are eligible to participate in
the Plan. The Plan provides for Company contributions equal to 4% of each
participant's annual compensation. In addition, discretionary contributions may
be made by the Company from time to time in an amount determined by the
Company's Board of Directors. Mandatory contributions are fully vested
immediately while discretionary contributions vest on a graduated basis and
become 100% vested after six years of service. Plan participants may also
contribute a portion of their annual compensation to the Plan, subject to
maximums imposed by the Internal Revenue Code and related regulations. Costs
charged to operations for Company contributions were $564,000, $566,000, and
$574,000 for the years 1996, 1995 and 1994, respectively. The Company may make
all or a portion of its contributions in the form of Class A Common Stock and
2,500,000 shares have been reserved for this purpose. The liability for Company
contributions for 1996 and 1995 was satisfied by the contribution of 282,808
shares and 225,874 shares, respectively, of Class A Common Stock. The
contribution of shares for 1996 was made in February 1997 and the contribution
of shares for 1995 was made in February 1996. Such shares were issued from the
authorized but unissued Class A Common Stock of the Company. Cash was
contributed by the Company to satisfy its liability to the Plan for 1994.

19
<PAGE>

Note 7. Stock Option Plans

The 1990 Long-Term Incentive Plan adopted as of August 1, 1990, as amended (the
"1990 Plan"), provides for the granting of options which are either intended to
qualify as "incentive stock options" under the Internal Revenue Code ("IS's") or
are "non-qualified stock options" ("NQS's"). The Company has reserved 3,000,000
shares of Class A Common Stock for issuance to employees and non-employee
directors. The Option Plan Committee of the Company's Board of Directors
determines grants to be made with the exception of grants of NQS's to non-
employee directors of the Company which are determined by the Board of
Directors. NQS's may be granted with an exercise price which is not less than
85% of the fair market value of the Class A Common Stock on the date of grant.
IS's may be granted with an exercise price which is not less than 100% of fair
market value of the Class A Common Stock on the date of grant, except IS's
granted to an employee who owns 10% or more of the total combined voting power
of all classes of stock of the Company must be at least 110% of the fair market
value at the date of grant. Prior to adopting the 1990 Plan, the company
established the 1990 Stock Option Plan (the "Old Plan") as of January 16, 1990
for the purpose of granting options for Class B Common Stock to salaried
employees of the Company who were neither officers nor directors. Options
granted under the Old Plan had a five-year term from the date of grant. All
such options expired on January 16, 1995. No additional options will be granted
under the Old Plan. The following summarizes the stock option activity for the
three years ended December 31, 1996:

<TABLE>
<CAPTION>
Number Per Share
1990 Plan (Class A Common Stock) of options option price
------------------------------
<S> <C> <C>
Outstanding at January 1, 1994.... 1,362,813 $2.00-$12.88
Cancelled......................... 205,528 $2.00-$10.00
------------------------------
Outstanding at December 31, 1994.. 1,157,285 $2.00-$12.88
Granted........................... 15,000 $2.00
Exercised......................... 3,000 $2.00
Cancelled......................... 76,090 $2.00-$10.00
------------------------------
Outstanding at December 31, 1995.. 1,093,195 $2.00-$12.88
Granted........................... 545,000 $2.38
Cancelled......................... 388,450 $2.00-$10.00
------------------------------
Outstanding at December 31, 1996.. 1,249,745 $2.00-$12.88
Exercisable at December 31, 1996. 537,945 $2.00-$12.88
-----------
Available for grant at
December 31, 1996............... 1,750,255
-----------
Old Plan (Class B Common Stock)
Outstanding at January 1, 1994.... 226,004 $3.51
Cancelled......................... 43,248 $3.51
Outstanding at December 31, 1994.. 182,756 $3.51
------------------------------
Cancelled......................... 182,756 $3.51
Outstanding at December 31, 1995
and 1996........................ --
-----------
</TABLE>

Note 8. Shareholders' Equity

Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes on all matters submitted to a vote
of the shareholders. Except for the election of the Company's Board of
Directors, the Class A Common Stock and the Class B Common Stock vote together
as a single class on all matters presented for a vote of the shareholders.
However, with regard to the election of directors, the holders of the Class A
Common Stock, voting as a separate class, will elect the minimum number of
directors as shall constitute at least 25% of the total Board of Directors and
the holders of the Class B Common Stock, voting as a separate class, will elect
the remaining directors for as long as the outstanding Class B Common Stock has
more than 50% of the total outstanding voting power of the common stock.
Thereafter, the holders of the Class A and Class B Common Stock will vote
together as a single class for the election of directors. The holders of a
majority of all outstanding shares of Class A Common Stock or Class B Common
Stock, voting as separate classes, must also approve amendments to the Articles
of Incorporation that adversely affect the shares of their class. Shares of
Class A Common Stock and Class B Common Stock do not have cumulative voting
rights.

Each share of Class B Common Stock is convertible into one share of Class A
Common Stock at any time at the option of the shareholder. Shares of Class B
Common Stock are also automatically converted into shares of Class A Common
Stock on the transfer of such shares to any person other than the Company,
another holder of Class B Common Stock or certain specified permitted
transferees, as defined in the Company's Articles of Incorporation.

The Company's Board of Directors has the authority to issue up to 2,000,000
shares of no par value preferred stock without any further vote or action by the
shareholders. The preferred stock may be issued from time to time in one or
more series and each series will have such voting powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions as established by the Board of
Directors at the time of issuance. No preferred stock has been issued.

Note 9. Legal Matters

20
<PAGE>

the Company, the signatories to the registration statements filed with the
Securities and Exchange Commission during October 1990, and the Company's
underwriters violated federal securities laws in connection with the Company's
public offering of six million shares of Class A Common Stock in October 1990.
Among other things, the suit alleges misrepresentations and failure to disclose
allegedly material information concerning the nature of the Company's market;
the size of the Company's market; the Company's failure to disclose that its
landfills were located within a 50-mile radius of each other in Ohio, thus
making the Company especially vulnerable to local conditions and competition;
the Company's failure to set forth the present and imminent competition; and the
Company's growth. The Plaintiff seeks damages in an unspecified amount alleged
to have arisen in part from the decline in the price of the Company's stock
following the public offering, and rescission. The Court has not yet determined
whether the suit will proceed as a class action.

The Company's estimates are revised, as deemed necessary, as additional
information becomes known. While the measurement of environmental liabilities
is inherently difficult and the possibility remains that technological,
regulatory or enforcement developments, the results of environmental studies or
other factors could materially alter the Company's expectations at any time, the
Company does not anticipate that the amount of any such revisions will have a
material adverse effect on operations or consolidated financial position.

21
<PAGE>

demand for arbitration against Shattuck with the Denver Regional Office of the
American Arbitration Association relating to the PSA. The demand for
arbitration claims, among other things: (i) that Shattuck is in default and has
materially breached its payment obligations to Earth Sciences by failing to pay
outstanding invoices; (ii) that Shattuck has summarily and wrongfully denied
requested change orders; and (iii) that Shattuck has anticipatorily breached
the PSA.

On March 21, 1997 Earth Sciences received a letter from Shattuck advising
Earth Sciences that the stop work order issued by the US EPA on January 22, 1997
had been lifted on March 20, 1997 and that Shattuck will be engaging another
contractor to complete the project.

A hearing date has not yet been set. Failure to resolve the pending dispute
in an expedited manner and in favor of the Company could have a material adverse
effect on the Company's future financial results.

In the ordinary course of conducting its business, the Company also becomes
involved in lawsuits, administrative proceedings and governmental
investigations, including those relating to environmental matters. Some of
these proceedings may result in fines, penalties or judgments being assessed
against the Company which, from time to time, may have an impact on its business
and financial condition. The Company does not believe that such pending
proceedings, individually, or in the aggregate, would have a material adverse
effect on its business or its financial conditions.

Note 10. Closure Costs and Post-Closure Monitoring Costs

The United States Environmental Protection Agency's "Subtitle (D) Regulations"
provide minimum design, construction and operating standards for virtually all
landfills in the United States. Furthermore, regulations promulgated by the
Ohio Environmental Protection Agency ("Ohio EPA") require every Ohio landfill to
utilize the "best available technology" with respect to cell preparation and
lining, leachate collection and treatment, and groundwater monitoring as well as
to provide financial assurances adequate to cover closure costs and post-closure
monitoring costs for a period of up to 30 years after the landfill is closed.
As a result of the above-described requirements, the Company has future
financial obligations with regard to closure costs and post-closure monitoring
costs associated with the disposal sites it operates. Although the precise
amount of these future obligations cannot be determined, the Company has
developed procedures to estimate these total projected costs based on currently
available facts, existing technology and presently enacted laws and regulations.
As of December 31, 1996, the Company estimated that the total closure costs and
post-closure monitoring costs it will incur for all of its disposal facilities
is approximately $31.2 million; however, in accordance with Ohio's financial
assurance regulations, the Company currently estimates that it will be required
to ultimately provide approximately $32.5 million of financial assurances to the
State of Ohio. At December 31, 1995 the Company had deposited approximately
$5.1 million into trusts for the benefit of the Ohio EPA to fund the financial
assurance requirements for its landfills. Such funds were included in the 1995
Consolidated Balance Sheets under the caption "Deposits." During 1996 the
Company utilized insurance to satisfy the financial assurance requirements for
its American and Mahoning landfill facilities. As a result of using such
insurance, in June 1996, the Company received $2.5 million from its trust fund
deposits relating to the American landfill facility, and in July 1996, the
company received $.7 million from its trust fund deposits relating to the
Mahoning landfill facility. The Company continues to use a trust fund to
satisfy the financial assurance requirements for its East Liverpool facility.
In April 1996 the Company deposited approximately $.3 million into the trust to
fund a portion of the current financial assurance obligation for that facility.
Such fund, which is recorded by the Company at cost which approximates market
value, is included in the Consolidated Balance Sheets under the caption
"Deposits" and amounted to $2.3 million at December 31, 1996. The funds in the
trust are invested primarily in short-term securities, commercial paper or
certificates of deposit with investment earnings accruing to the benefits of the
Company. The Company will continue to review and update the underlying
assumptions used to estimate the total projected costs and financial assurance
requirements and, accordingly, such estimates will be subject to periodic
revision and adjustment at least annually. In the third quarter of 1995, as a
result of a resolution reached with the Ohio EPA alleging violations of American
Landfill, Inc.'s ("ALI") 1985 permit and related regulations concerning its
capacity , ALI incurred a charge of

22
<PAGE>

approximately $9,165,000 to reflect the accrual of closure and post-closure
monitoring costs based upon the remaining capacity of the landfill. This charge
is reflected under the caption "Closure and post-closure monitoring costs" on
the Consolidated Statements of Operations for 1995. During 1995 the Company made
a decision not to further develop the East Liverpool landfill facility and, as a
result, the facility has very limited airspace available for waste disposal. As
such, in the fourth quarter of 1995 the Company accrued additional closure and
post-closure monitoring costs amounting to $6,821,000. This charge is also
included under the caption "Closure and post-closure monitoring costs" on the
Consolidated Statements of Operations for 1995.

Note 11. Lease Commitments

The Company leases certain office facilities, vehicles, machinery and equipment.
Future commitments under long-term, noncancellable operating leases at December
31, 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
Year ending December 31,
- --------------------------
<S> <C>
1997...................... $ 872
1998...................... 647
1999...................... 540
2000...................... 515
2001...................... 515
After 2001................ -0-
------
$3,089
------
</TABLE>

Rental expense included in the consolidated statements of operations amounted
to $1,450,000 in 1996, $1,581,000 in 1995, and $1,124,000 in 1994.

Note 12. Business Segment Information

The Company's primary business segment provides integrated waste management and
environmental services, which include the operation of nonhazardous solid waste
landfills for the disposal of special waste and municipal solid waste;
transportation of hazardous and nonhazardous waste; transportation and disposal
brokerage and management services; collection services; and environmental
engineering, site assessments, analytical laboratory and remediation services.
The Company, as part of its transportation operations, also operates a second
business segment; a common carrier of general and bulk commodities within the
United States and several provinces of Canada. Other businesses include the
operation of a public golf course. The Company does not have significant
operations located outside the United States and, accordingly, geographical
segment information is not presented.

Segment operating income reflects the results of operations of each business
segment before income taxes, interest income and expense, and items of a general
nature not readily allocable to a separate segment (see Note 2).

Identifiable assets are the total assets used in the operation of each
business segment. Corporate assets are principally cash and cash equivalents
and certain real estate assets. Business segment information is as follows (in
thousands):

<TABLE>
<CAPTION>
1996 1995 1994
------------------------------
<S> <C> <C> <C>
Net operating revenues:
Integrated waste management
and environmental services........ $ 63,382 $ 67,919 $ 73,103
Transportation of general and
bulk commodities.................. 12,181 12,562 12,922
Other businesses.................... 3,461 3,219 2,754
------------------------------
$ 79,024 $ 83,700 $ 88,779
------------------------------
Operating income (loss):
Integrated waste management
and environmental services........ $ 9,397 $(33,806) $ 9,281
Transportation of general and
bulk commodities.................. 618 (1,326) 545
Other businesses.................... 326 113 239
------------------------------
Segment operating income (loss)...... 10,341 (35,019) 10,065
Interest expense and
amortization of debt discount....... (223) (974) (1,128)
Interest income...................... 390 665 450
General corporate expenses........... (5,629) (6,225) (5,667)
------------------------------
Income (loss) before income taxes
and extraordinary credit............ $ 4,879 $(41,553) $ 3,720
------------------------------
Depreciation and amortization:
Integrated waste management
and environmental services........ $ 5,955 $ 7,459 $ 9,855
Transportation of general and
bulk commodities.................. 529 605 582
Other businesses.................... 247 227 187
Corporate........................... 244 270 282
------------------------------
$ 6,975 $ 8,561 $ 10,906
------------------------------
Capital expenditures:
Integrated waste management
and environmental services........ $ 17,238 $ 9,621 $ 5,789
Transportation of general and
bulk commodities.................. 864 306 249
Other businesses.................... 90 1,049 169
Corporate........................... 562 56 17
------------------------------
$ 18,754 $ 11,032 $ 6,224
------------------------------
Identifiable assets at December 31:
Integrated waste management
and environmental services........ $ 93,313 $ 93,002 $115,486
Transportation of general and
bulk commodities.................. 7,947 5,965 8,099
Other businesses.................... 6,503 6,487 5,567
Corporate........................... 9,700 10,282 12,657
------------------------------
$117,463 $115,736 $141,809
------------------------------
</TABLE>

23
<PAGE>

Note 13. Quarterly Financial Data (Unaudited)

Selected quarterly financial data for each quarter in 1996 and 1995 is as
follows (in thousands except for per share amounts):

Year ended December 31, 1996
------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net operating revenues........................ $16,696 $19,046 $22,317 $ 20,965 $ 79,024
Income from operations........................ 159 1,581 1,895 841 4,476
Net income.................................... 171 1,069 1,278 604 3,122
Net income per share.......................... $ .01 $ .04 $ .04 $ .02 $ .10
------------------------------------------------

Year ended December 31, 1995
------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------------------------------------------------
Net operating revenues........................ $22,899 $19,597 $21,078 $ 20,126 $ 83,700
Income (loss) from operations................. 427 145 (8,358) (32,518) (40,304)
Income (loss) before extraordinary credit..... 207 (2) (5,588) (26,347) (31,730)
Extraordinary credit, net of tax.............. -- -- -- 2,489 2,489
Net income (loss)............................. 207 (2) (5,588) (23,858) (29,241)
Income (loss) per share before extraordinary
credit....................................... $ .01 $ .00 $ (.19) $ (.88) $ (1.06)
Net income (loss) per share................... $ .01 $ .00 $ (.19) $ (.80) $ (.98)
------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Independent Auditors' Report

The Shareholders and Board of Directors of American Waste Services, Inc.

We have audited the accompanying consolidated balance sheets of American Waste
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Waste
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Cleveland, Ohio
February 18, 1997, except as to Note 9, which is as of March 21, 1997.

24
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Digest of Financial Data

<TABLE>
<CAPTION>
(All amounts are in thousands, except per share data,
percentages and number of employees)
------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected statement of operations information
Net operating revenues............................................. $ 79,024 $ 83,700 $ 88,779 $ 87,323 $ 92,587
Income (loss) from operations...................................... 4,476 (40,304) 4,339 7,962 11,663
Interest expense and
amortization of debt discount..................................... 223 974 1,128 1,646 2,179
Income (loss) before income taxes and
extraordinary credit.............................................. 4,879 (41,553) 3,720 6,776 9,933
Extraordinary credit, net of tax................................... -- 2,489 -- -- --
Net income (loss).................................................. 3,122 (29,241) 2,040 4,011 6,164
Income (loss) per share before
extraordinary credit.............................................. .10 (1.06) .07 .14 .21
Extraordinary credit, per share.................................... -- .08 -- -- --
Net income (loss) per share........................................ .10 (.98) .07 .14 .21
Dividends per Class A share........................................ -- -- -- -- --
Dividends per Class B share........................................ -- -- -- -- --
Weighted average shares used to
calculate net income (loss) per share............................. 30,236 29,982 29,888 29,710 29,712
Selected cash flow information
Cash flows provided by
operating activities.............................................. 18,922 15,155 11,807 14,899 14,700
Cash used for capital expenditures................................. 18,754 11,032 6,224 10,174 10,676
Cash used for business acquisitions................................ -- -- 87 2,359 4,481
Selected year-end balance sheet information
Cash and cash equivalents.......................................... 4,286 5,186 7,347 6,467 6,348
Current assets..................................................... 22,012 28,308 30,833 26,857 25,170
Current liabilities................................................ 15,729 12,177 16,045 15,942 13,374
Working capital.................................................... 6,283 16,131 14,788 10,915 11,796
Properties less accumulated
depreciation and amortization..................................... 89,637 78,636 87,375 91,362 76,547
Total assets....................................................... 117,463 115,736 141,809 141,703 124,298
Current portion of long-term debt.................................. 305 358 4,559 4,568 3,259
Long-term debt..................................................... 3,836 8,748 11,843 21,770 18,136
Deferred income taxes.............................................. 7,757 6,559 10,352 9,977 2,957
Shareholders' equity............................................... 70,932 67,245 96,480 93,842 89,831
Other information
Working capital ratio.............................................. 1.4:1 2.3:1 1.9:1 1.7:1 1.9:1
Percent of debt-to-total capital employed.......................... 6% 12% 15% 22% 19%
Quoted market price-Class A shares:
High.............................................................. 4 3/4 5 5/8 3 1/8 3 3/8 7 3/8
Low............................................................... 2 1 1/8 1 1/2 1 3/4 2 1/2
Year-end.......................................................... 2 3/8 2 1 5/8 3 1/8 3 3/8
Number of employees at year-end.................................... 503 477 527 502 498

</TABLE>

25
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Company Location Directory

Corporate Office

American Waste Services, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Disposal Facilities

American Landfill, Inc.
7916 Chapel Street, S.E.
Waynesburg, Ohio 44688

Mahoning Landfill, Inc.
3510 Garfield Road
New Springfield, Ohio 44443

East Liverpool Landfill, Inc.
Y & O Road
East Liverpool, Ohio 43920

Disposal Services

American Waste Management
Services, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Collection Services

American Waste, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

American Waste of Mahoning
Valley, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

American Waste of Northeast
Ohio, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Transportation Offices

DartAmericA, Inc.
Dart Trucking Company, Inc.
Dart Services, Inc.
TRB National Systems, Inc.
61 Railroad Street
Canfield, Ohio 44406
(330) 533-9841

Envirco Transportation
Management, Inc.
One American Way
Warren, Ohio 44484-5555
(330) 856-8850

Transportation Terminals

Dart Trucking Company, Inc.
200 Old Webster Road
Oxford, Massachusetts 01540

Dart Trucking Company, Inc.
61 Railroad Street
Canfield, Ohio 44406

Dart Trucking Company, Inc.
3332 St. Lawrence Drive
Toledo, Ohio 43605

Dart Trucking Company, Inc.
1807A Route 7
Kenova, West Virginia 25530

Technical Services

Earth Sciences Consultants, Inc.
Corporate Headquarters
One Triangle Drive
Export, Pennsylvania 15632
(412) 733-3000

Earth Sciences Consultants, Inc.
Philadelphia Regional Office
490 Norristown Road, Suite 250
Office Court at Walton Point
Blue Bell, Pennsylvania 19422
(610) 828-2525

Earth Sciences Consultants, Inc.
Ohio Operations
190 N. Union Street, Suite 301
Akron, Ohio 44304
(330) 535-6966

Earth Sciences Consultants, Inc.
Rocky Mountain Operations
565 East 70th Avenue
Unit 1W
Denver, Colorado 80229
(303) 287-9500

Antech Ltd.
One Triangle Drive
Export, Pennsylvania 15632
(412) 733-1161

AWS Remediation, Inc.
One Triangle Drive
Export, Pennsylvania 15632
(412) 733-1009

AWS Remediation, Inc.
Rocky Mountain Operations
565 East 70th Avenue
Unit 1W
Denver, Colorado 80229
(303) 287-9500

26
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Directors and Officers

Directors

Ronald E. Klingle
/1/(Chairman) /2/(Chairman)
Chairman of the Board and
Chief Executive Officer

Darrell D. Wilson /1,2/
President and Chief
Operating Officer

Charles Boryenace/1,2/
Executive Vice President,
Strategic Planning

Mark B. Cawthorne
Executive Vice President,
Transportation Services

Timothy C. Coxson/1/
Executive Vice President,
Finance, Treasurer and
Chief Financial Officer

George P. Ellis
Executive Vice President,
Technical Services

Stephen G. Kilper
Executive Vice President,
Disposal Services

Kenneth J. McMahon
Executive Vice President,
Sales

Sanford B. Ferguson /3,4/
Partner, Kirkpatrick & Lockhart
(law firm)

James A. Johnson /3,4/
Managing General Partner,
The Apex Fund
(venture capital fund)

F. Oliver Nicklin, Jr.
/3/(Chairman)/ 4/(Chairman)
President, First Analysis
Securities Corporation
(venture capital and investment
banking operations)

John R. Miller
Founder, President and
Chief Executive Officer,
TBN Holdings Inc.
(firm engaged in resource
recovery and recycling)

Officers

Ronald E. Klingle
Chairman of the Board and
Chief Executive Officer

Darrell D. Wilson
President and Chief
Operating Officer

Michael D. Barwick
Executive Vice President,
Collection Services

Charles Boryenace
Executive Vice President,
Strategic Planning

Mark B. Cawthorne
Executive Vice President,
Transportation Services

Timothy C. Coxson
Executive Vice President,
Finance, Treasurer and
Chief Financial Officer

Jeffrey M. Grinstein
Executive Vice President,
General Counsel and Secretary

Stephen G. Kilper
Executive Vice President,
Disposal Services

Kenneth J. McMahon
Executive Vice President, Sales

Frances R. Klingle
Chief Administrative Officer
and Controller

Patrick M. Alcorn
Vice President,
Transportation Sales

James E. Smith
Vice President,
Disposal Sales

Robert D. Hazen
Vice President,
National Accounts

David S. Hess
Vice President,
Technical Sales

Kenneth R. Nichols
Vice President,
Taxes
/1/ Executive Committee
/2/ Compensation Committee
/3/ Audit Committee
/4/ Option Plan Committee

27
<PAGE>

American Waste Services, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Shareholder Information

Annual meeting of shareholders

The annual meeting of shareholders will be held at the Grand Pavilion, One
American Way, Warren, Ohio, on Tuesday, April 29, 1997, at 10:00 a.m.

Common stock information

The Company's Class A Common Stock is listed on the New York Stock Exchange
(symbol: AW). Quarterly stock information for 1996 and 1995 as reported by The
Wall Street Journal is as follows:

<TABLE>
<CAPTION>
1996:
Quarter Ended High Low Close
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31 $3 1/4 $ 2 $ 2 7/8
June 30 4 3/4 2 3/8 3 1/4
September 30 3 1/4 2 1/4 2 1/2
December 31 2 1/2 2 2 3/8

1995:
Quarter Ended High Low Close
- ---------------------------------------------------------------------------------
March 31 $1 7/8 $ 1 1/8 $ 1 1/8
June 30 1 3/4 1 1/4 1 3/4
September 30 5 5/8 1 3/8 3
December 31 3 5/8 2 2
</TABLE>

No dividends were paid during 1996 or 1995.

There are 1,105 Class A and 20 Class B Common Stock shareholders of record as of
the close of business March 3, 1997. The number of holders is based upon the
actual holders registered on the records of the Company's transfer agent and
registrar and does not include holders of shares in "street names" or persons,
partnerships, associations, corporations or other entities identified in
security position listings maintained by depository trust companies.

Dividend policy

The Company presently intends to retain earnings for use in the operation and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.

Annual report on Form 10-K

Copies of the Company's annual report on Form 10-K can be obtained free of
charge by writing to American Waste Services, Inc., One American Way, Warren,
Ohio 44484-5555, Attention: Shareholder Relations.

Transfer agent and registrar

The transfer agent and registrar for the Company is American Stock Transfer and
Trust Company. All correspondence concerning stock transfers should be directed
to them at 40 Wall Street, New York, New York 10005.

Investor inquiries

Security analysts, institutional investors, shareholders, news media
representatives and others seeking financial information or general information
about the Company are invited to direct their inquiries to Timothy C. Coxson,
Executive Vice President, Finance, Treasurer, and Chief Financial Officer,
telephone (330) 856-8800.

Policy statement on equal

employment opportunity and

affirmative action

The Company is firmly committed to a policy of equal employment opportunity and
affirmative action. Toward this end, the Company will continue to recruit,
hire, train and promote persons in all job titles, without regard to race,
color, religion, sex, national origin, age, handicap, ancestry or Vietnam-era or
disabled veteran status. We will base all decisions on merit so as to further
the principle of equal employment opportunity. This policy extends to
promotions and to all actions regarding employment including compensation,
benefits, transfers, layoffs, return from layoffs, Company-sponsored training
and social programs.

<PAGE>

EXHIBIT 21.1

AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES

SUBSIDIARIES OF THE COMPANY

The following is a list of the Company's subsidiaries except for unnamed
subsidiaries which considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary

STATE OF
SUBSIDIARY NAME INCORPORATION
- --------------- -------------

American Landfill Gas Company Ohio
American Landfill, Inc. Ohio
American Waste, Inc. Ohio
American Waste of Mahoning Valley, inc. Ohio
American Waste of Northeast Ohio, Inc. Ohio
American Waste Management Services, Inc. Ohio
Antech Ltd. Pennsylvania
Avalon Lakes Golf, Inc. Ohio
Avalon Travel, Inc. Ohio
TBG, Inc. Ohio
AWS Remediation, Inc. Pennsylvania
DartAmericA, Inc. Ohio
TRB National Systems, Inc. Ohio
Dart Trucking Company, Inc. Ohio
Dart Realty, Inc. Ohio
Dart Services, Inc. Ohio
Eagle Fidelity Insurance Company Vermont
Earth Sciences Consultants, Inc. Pennsylvania
Mullen Environmental Services, Inc. Colorado
East Liverpool Landfill, Inc. Ohio
Envirco Transportation, Inc. Ohio
Envirco Transportation Management, Inc. Ohio
Mahoning Landfill, Inc. Ohio
SLF Development, Inc. Ohio

_____________________________________________________________

Parent/subsidiary relationships are indicated by indentations. In each case,
100% of the voting securities of each of the subsidiaries is owned by the
indicated parent of such subsidiary.

<PAGE>

EXHIBIT 23.1
Independent Auditors' Report
----------------------------

The Shareholders and Board of Directors
of American Waste Services, Inc.:

Under date of February 18, 1997, except as to Note 9, which is as of March 21,
1997 we reported on the consolidated balance sheets of American Waste Services,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996, as contained
in the 1996 annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by reference in the annual
report on Form 10-K for the year 1996. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related financial statement schedule as listed in the accompanying index. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Cleveland, Ohio

February 18, 1997

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM YEAR END
1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,286
<SECURITIES> 0
<RECEIVABLES> 15,016
<ALLOWANCES> 506
<INVENTORY> 0
<CURRENT-ASSETS> 22,012
<PP&E> 135,396
<DEPRECIATION> 45,759
<TOTAL-ASSETS> 117,463
<CURRENT-LIABILITIES> 15,729
<BONDS> 0
0
0
<COMMON> 64,482
<OTHER-SE> 6,450
<TOTAL-LIABILITY-AND-EQUITY> 117,463
<SALES> 79,024
<TOTAL-REVENUES> 79,024
<CGS> 63,860
<TOTAL-COSTS> 74,548
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 223
<INCOME-PRETAX> 4,879
<INCOME-TAX> 1,757
<INCOME-CONTINUING> 3,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,122
<EPS-PRIMARY> .10
<EPS-DILUTED> .10

</TABLE>