<PAGE>
1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1997
[ ] 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
Indicate by a 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 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 August 1, 1997.
===============================================================================
<PAGE>
AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1997 and 1996 (Unaudited)............... 3
Condensed Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 (Unaudited)......................................... 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 (Unaudited)...................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)..... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 17
Item 2. Changes in Securities....................................... 18
Item 3. Defaults upon Senior Securities............................. 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
Item 5. Other Information........................................... 18
Item 6. Exhibits and Reports on Form 8-K............................ 18
SIGNATURE.............................................................. 19
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net operating revenues.................... $19,100 $19,046 $36,598 $35,742
Cost and expenses:
Cost of operations........................ 15,268 14,708 31,434 28,866
Selling, general and administrative
expense.................................. 3,020 2,757 5,869 5,136
------- ------- ------- -------
Income (loss) from operations............. 812 1,581 (705) 1,740
Other income (expense):
Interest expense.......................... (83) (42) (115) (71)
Other income, net......................... 342 243 472 398
------- ------- ------- -------
Income (loss) before income taxes......... 1,071 1,782 (348) 2,067
Income taxes.............................. 214 713 (70) 827
------- ------- ------- -------
Net income (loss)......................... $ 857 $ 1,069 $ (278) $ 1,240
======= ======= ======= =======
Net income (loss) per share............... $ .03 $ .04 $ (.01) $ .04
======= ======= ======= =======
Weighted average shares outstanding
(Note 2)................................. 30,432 30,363 30,356 30,219
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- -----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents.................. $ 1,996 $ 4,286
Accounts receivable, net................... 15,484 14,510
Prepaid expenses and other current assets.. 2,092 3,216
-------- --------
Total current assets...................... 19,572 22,012
Properties and equipment, less accumulated
depreciation and amortization of $48,007
in 1997 and $45,759 in 1996................ 92,204 89,637
Deposits.................................... 2,670 2,314
Costs in excess of fair market value of net
assets of acquired businesses, net......... 3,108 3,193
Other assets, net........................... 260 307
-------- --------
Total assets.............................. $117,814 $117,463
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt.......... $ 314 $ 305
Accounts payable........................... 5,094 8,495
Accrued payroll and other compensation..... 1,255 1,076
Accrued income taxes....................... 260 315
Other accrued taxes........................ 1,988 2,127
Accrued closure costs and
post-closure costs........................ 566 1,267
Other liabilities and accrued expenses..... 2,383 2,144
-------- --------
Total current liabilities................. 11,860 15,729
Long-term debt.............................. 7,677 3,836
Deferred income taxes....................... 7,656 7,757
Noncurrent accrued closure costs and
post-closure costs......................... 17,155 16,932
Other noncurrent liabilities................ 2,247 2,277
Shareholders' equity (Note 3):
Preferred stock, no par value.............. -- --
Class A Common Stock, no par value......... 64,267 63,702
Class B Common Stock, no par value......... 780 780
Retained earnings.......................... 6,352 6,630
Treasury Stock, Class B Common
Stock, at cost............................ (180) (180)
-------- --------
Total shareholders' equity............... 71,219 70,932
-------- --------
Total liabilities and
shareholders' equity.................... $117,814 $117,463
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Operating activities:
Net (loss) income..................................................................... $ (278) $ 1,240
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization........................................................ 3,636 3,460
Provision for accrued closure costs and post-closure costs........................... 223 372
Provision for deferred income taxes.................................................. (101) (102)
Provision for losses on accounts receivable.......................................... 91 76
Gain on sales of fixed assets........................................................ (273) (100)
Changes in assets and liabilities excluding the effects of business acquisitions:
Increase in accounts receivable.................................................... (1,065) (326)
Decrease in refundable income taxes................................................ -- 5,519
Decrease in prepaid expenses and other current assets.............................. 1,124 801
(Increase) decrease in other assets................................................ 6 (3)
Increase (decrease) in accounts payable............................................ (3,401) 595
Increase in accrued payroll and other compensation................................. 179 374
Increase (decrease) in accrued income taxes........................................ (55) 866
Decrease in other accrued taxes.................................................... (139) (205)
Increase (decrease) in other liabilities and accrued expenses...................... 804 (159)
Decrease in accrued closure costs and post-closure costs........................... (701) (88)
Decrease in other noncurrent liabilities........................................... (30) (135)
-------- --------
Net cash provided by operating activities.......................................... 20 12,185
-------- --------
Investing activities:
Capital expenditures.................................................................. (6,197) (9,264)
Proceeds from sales of fixed assets................................................... 393 818
(Increase) decrease in deposits, net.................................................. (356) 2,113
-------- --------
Net cash used in investing activities.............................................. (6,160) (6,333)
-------- --------
Financing activities:
Proceeds from issuance of long-term debt.............................................. 4,300 --
Repayments of long-term debt.......................................................... (450) (7,416)
-------- --------
Net cash provided (used) in financing activities.................................... 3,850 (7,416)
-------- --------
Decrease in cash and cash equivalents.................................................... (2,290) (1,564)
Cash and cash equivalents at beginning of year........................................... 4,286 5,186
-------- --------
Cash and cash equivalents at end of period............................................... $ 1,996 $ 3,622
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
AMERICAN WASTE SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1997
Note 1. Basis of Presentation
The unaudited condensed consolidated financial statements of American Waste
Services, Inc., and its subsidiaries (collectively the "Company" or "AWS") and
related notes included herein have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted herein consistent with such rules and regulations. The accompanying
unaudited condensed consolidated financial statements and related notes should
be read in conjunction with the consolidated financial statements and related
notes included in the Company's 1996 Annual Report to Shareholders.
In the opinion of management, these unaudited condensed consolidated financial
statements include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position of the Company as of
June 30, 1997, and the results of operations and cash flows for the interim
periods presented.
The operating results for the interim periods are not necessarily indicative of
the results to be expected for the full year.
Note 2. Net Income (Loss) Per Share
Net income (loss) per share has been computed using the weighted average number
of common and common equivalent shares outstanding each period which amounted to
30,432,000 and 30,363,000 in the second quarter of 1997 and 1996, respectively,
and 30,356,000 and 30,219,000 in the first six months of 1997 and 1996,
respectively. Common equivalent shares, which represent shares issuable upon
the exercise of outstanding stock options, totaled 6,000 and 220,000 in the
second quarter of 1997 and 1996, respectively, and 15,000 and 149,000 in the
first six months of 1997 and 1996, respectively.
Note 3. Shareholders' Equity
The Company sponsors a defined contribution profit sharing plan that is
qualified under Section 401(k) of the Internal Revenue Code (the "Plan").
During February 1997, the Company issued 282,808 shares of Class A Common Stock
to the Plan to satisfy its liability of $565,000 for 1996 Company contributions.
Note 4. Debt
During the first six months of 1997 the Company borrowed $4.3 million under its
revolving credit facility, primarily to fund capital expenditures for the
collection, disposal and transportation operations. The amount outstanding at
June 30, 1997 under the revolving credit facility was $14.8 million, including
$8.2 million in letters of credit. 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 costs and post-
6
<PAGE>
closure costs to the State of Ohio for the Company's American and Mahoning
landfill facilities and its tire monofill facility. (See Note 6. Closure Costs
and Post-Closure Costs.)
Note 5. Legal Matters
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. During the third quarter of 1997, the
Company's subsidiaries became parties to an Agreed Order for Remedial
Investigation/Feasibility Study and the Four County Landfill Site Participation
Agreement ("Participation Agreement"). A large number of waste generators and
other waste transportation and disposal companies have also been identified as
responsible or potentially responsible parties; however, because the law assigns
joint and several liability among the responsible parties, although unlikely,
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 ultimate 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
7
<PAGE>
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. The Company anticipates
obtaining additional information over the next several months by reason of,
among other things, having entered into the Participation Agreement.
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.
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 was suspended as a result of a Stop Work
Order issued by the United States Environmental Protection Agency ("US EPA")
from January 22, 1997 until March 20, 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 proceed
with the work in accordance with 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 had been lifted and that
Shattuck would be engaging another contractor to complete the project. Earth
Sciences has demobilized from the Project site and Shattuck has engaged another
contractor to complete the project.
The Company and Shattuck are currently engaged in settlement discussions. Based
upon the current discussions, the Company is contemplating a settlement which
would result in Shattuck paying the Company less than what has previously been
invoiced. Accordingly, the resolution would negatively impact future financial
results but would not have a material adverse effect on the Company's
consolidated financial position. If a resolution cannot be reached, the
arbitration hearing has been rescheduled for the first half of 1998.
8
<PAGE>
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 condition.
Note 6. Closure Costs and Post-Closure 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
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 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
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. The
Company utilizes insurance to satisfy the financial assurance requirements for
its American and Mahoning landfill facilities and its tire monofill facility.
The Company uses a trust fund to satisfy the financial assurance requirements
for its East Liverpool landfill facility. In April 1997 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
approximately $2.6 million and $2.3 million at June 30, 1997 and December 31,
1996, respectively. 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.
____________________________________________
____________________________________________
9
<PAGE>
Item 2. 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 operations and financial
condition of American Waste Services, Inc. and its subsidiaries. As used in
this report, the term "AWS", or "Company" mean American Waste Services, Inc. and
its wholly owned subsidiaries, taken as a whole, unless the context indicates
otherwise. The following discussion should be read in conjunction with the
condensed consolidated financial statements and accompanying notes included in
this report and the consolidated financial statements and related notes included
in the Company's 1996 Annual Report to Shareholders.
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
- -------------------------------
During the first six months of 1997 the Company utilized existing cash and
borrowings under its revolving credit facility to meet operating needs, repay
indebtedness and fund capital expenditure programs. Capital spending totaled
$6.2 million for the first six months of 1997 which was principally related to
the purchase of equipment for the Company's collection and transportation
operations and continued landfill development. During 1997 the Company's
capital spending is expected to range from $9 million to $11 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, replacing equipment or acquiring additional equipment
to support disposal operations, acquiring equipment associated with collection
services, and engineering and construction costs related 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.
The Company maintains an $18 million unsecured revolving credit facility with
two banks. Such facility provides for revolving credit loans and/or term loans
payable quarterly with a final maturity date no later than December 31, 2003.
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. On
July 15, 1997, the Company amended the agreement to increase the borrowing
capacity under the facility to $23 million until December 31, 1997 at which time
the Company's borrowing capacity will revert back to $18 million.
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
10
<PAGE>
amount of borrowings outstanding under the revolving credit facility at June 30,
1997 and December 31, 1996 was $6.6 million and $2.6 million, respectively. The
Company also had $8.2 million and $8.0 million in outstanding letters of credit
at June 30, 1997 and December 31, 1996, 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 costs to
the State of Ohio for the Company's American and Mahoning landfill facilities
and its tire monofill facility.
As a result of federal and state laws and regulations, the Company has future
financial obligations with regard to closure costs and post-closure 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 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 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. The Company utilized insurance to satisfy the
financial assurance requirements for its American and Mahoning landfill
facilities and its tire monofill facility. The Company uses a trust fund to
satisfy the financial assurance requirements for its East Liverpool landfill
facility. In April 1997 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, the Company's unused portion of its revolving credit facility
and 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 or equity, any of which could
impact liquidity in the future.
11
<PAGE>
Results of Operations
- ---------------------
Overall performance
Net operating revenues in the second quarter of 1997 increased to $19.1 million
compared with $19.0 million in the prior year's second quarter. The Company
recorded net income of $.9 million or $.03 per share in the second quarter of
1997 compared to net income of $1.1 million or $.04 per share for the second
quarter of 1996. For the first six months of 1997, net operating revenues were
$36.6 million compared with $35.7 million for the first six months of 1996.
During the first six months of 1997, the Company recorded a net loss of $.3
million, or a loss of $.01 per share, compared to net income of $1.2 million, or
$.04 per share, for the first six months of 1996. Net operating revenues and
operating income for the Company's business segments were as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net operating revenues:
Integrated waste management and
environmental services............. $14,730 $14,906 28,724 $28,237
Transportation of general and bulk
commodities........................ 3,324 3,040 6,459 6,136
Other businesses (1)................ 1,046 1,100 1,415 1,369
------- ------- ------- -------
$19,100 $19,046 $36,598 $35,742
======= ======= ======= =======
Operating income (2):
Integrated waste management and
environmental services............. $ 2,046 $ 2,793 $ 1,973 $ 4,508
Transportation of general and bulk
commodities........................ 219 113 357 147
Other businesses (1)................ 239 251 73 38
------- ------- ------- -------
2,504 3,157 2,403 4,693
Interest expense.................... (83) (42) (115) (71)
Interest income..................... 67 106 138 221
General corporate expenses.......... (1,417) (1,439) (2,774) (2,776)
------- ------- ------- -------
Income before income taxes.......... $ 1,071 $ 1,782 $ (348) $ 2,067
======= ======= ======= =======
</TABLE>
(1) Other businesses include the operation of a public golf course.
(2) Segment operating income reflects the results of operations of each segment
before income taxes, interest income and expense, and items of a general nature
not readily allocable to a separate business segment.
12
<PAGE>
Performance in the Second Quarter of 1997 compared with the Second Quarter of
- -----------------------------------------------------------------------------
1996
- ----
Segment performance
Net operating revenues of the Company's primary business segment, integrated
waste management and environmental services, decreased to $14.7 million in the
second quarter of 1997 from $14.9 million in the second quarter of the prior
year. Net operating revenue of the technical environmental services businesses
decreased during the second quarter of 1997 compared with the second quarter of
1996 primarily due to a decline in engineering and consulting services. Net
operating revenues of the disposal operations, including disposal brokerage,
recorded decreased net operating revenues primarily as a result of a decline in
disposal brokerage business. Although the volume of waste accepted at the
Company's landfills increased in the current quarter compared with the prior
year quarter, such increase was offset by a decline in the average disposal
prices. The Company's transportation operations recorded increased net
operating revenues in the second quarter of 1997 compared with the second
quarter of 1996 primarily as a result of increased transportation associated
with hazardous and industrial waste. Net operating revenues of the Company's
collection services, which commenced operations in the third quarter of 1996,
contributed to the net operating revenues in the second quarter of 1997.
Operating income of the integrated waste management and environmental services
segment decreased to $2.0 million in the second quarter of 1997 from $2.8
million in the prior year quarter. The decrease is primarily attributable to an
operating loss incurred in the second quarter of 1997 by the technical
environmental services business compared with operating income in the prior year
quarter. The operating loss incurred by the technical environmental services
businesses is primarily the result of a decrease in the net operating revenues
of the engineering consulting services. Operating income of the disposal
operations decreased in the second quarter of 1997 compared with the prior year
quarter primarily as a result of decreased disposal brokerage business. The
transportation operations recorded an increase in operating income primarily as
a result of increased business from the hauling of hazardous and industrial
waste.
The Company's second business segment, the transportation of general and bulk
commodities, recorded net operating revenues of $3.3 million in the second
quarter of 1996 compared with $3.0 million in the second quarter of 1996. This
business segment recorded operating income of $.2 million in the second quarter
of 1997 compared to $.1 million in the second quarter of the prior year
primarily as a result of increased business.
Interest expense
Interest expense was $83,000 in the second quarter of 1997 compared to $42,000
in the second quarter of the prior year. The increase was primarily attributed
to an increase in the amount of principal outstanding under the Company's
revolving credit facility. During the second quarter of 1997 interest costs
totaling $110,000 were capitalized compared with $53,000 in the second quarter
of the prior year.
13
<PAGE>
General corporate expenses
General corporate expenses were $1.4 million in both the second quarter of 1997
and 1996.
Net income
The Company recorded net income of $.9 million in the second quarter of 1997
compared with a net income of $1.1 million in the second quarter of the prior
year. The Company's overall effective tax rate, including the effect of state
income tax provisions, was 20% in the second quarter of 1997 compared to 40% in
the prior year's second quarter. The effective tax rate decreased as a result
of tax credits associated with the production and sale of landfill gas produced
at the Company's landfill gas extraction facility, which tax credits the company
expects to utilize in 1997.
Performance in the First Six Months of 1997 compared with the First Six Months
- ------------------------------------------------------------------------------
of 1996
- -------
Segment Performance
Net operating revenues of the Company's primary business segment, integrated
waste management and environmental services, increased to $28.7 million for the
first six months of 1997 from $28.2 million for the first six months of the
prior year. The Company's transportation operations recorded increased net
operating revenues for the first six months of 1997 compared to the first six
months of 1996 primarily as a result of increased transportation associated with
hazardous and industrial waste. Net operating revenue of the Company's
collection services, which commenced in the third quarter of 1996, also
contributed to the increase in net operating revenues of the Company in the
first six months of 1997 compared with the first six months of 1996. Net
operating revenues of the disposal operations decreased for the first six months
of 1997 compared with the first six months of 1996 primarily as a result of
decreased disposal brokerage business. Although the volume of waste accepted at
the Company's landfills increased for the first six months of 1997 compared with
the prior year period, such increase was offset by a decline in the average
disposal prices. The technical environmental services business recorded
decreased net operating revenues for the first six months of 1997 compared with
the first six months of 1996 primarily as a result of decreased engineering,
consulting and remediation services.
Operating income of the integrated waste management and environmental services
segment was $2.0 million for the first six months of 1997 compared with $4.5
million for the first six months of the prior year. The decrease in operating
income was primarily the result of an operating loss incurred by the technical
environmental services business. The operating loss incurred by the technical
environmental services business was primarily attributed to a remediation
project in Denver, Colorado and decreased engineering, consulting and
remediation services. Operating income of the transportation operations
increased primarily as a result of increased transportation of hazardous and
industrial waste. The disposal operations
14
<PAGE>
recorded decreased operating income primarily as a result of a decline in the
disposal brokerage business.
The Company's second business segment, the transportation of general and bulk
commodities, recorded net operating revenues of $6.5 million in the first six
months of 1997 compared with $6.1 million in the first six months of 1996. This
business segment recorded operating income of $.4 million in the first six
months of 1997 compared with $.1 million for the first six months of 1996. The
increase in net operating revenue is primarily the result of transporting
increased volumes of general and bulk commodities.
Interest expense
Interest expense was $115,000 in the first six months of 1997 as compared with
$71,000 in the first six months of 1996. The increase was primarily attributed
to an increase in the amount of principal outstanding under the Company's
revolving credit facility. During the first six months of 1997 interest costs
totaling $213,000 were capitalized compared with $201,000 in the first six
months of the prior year.
General corporate expenses
General corporate expenses were $2.8 million in the first six months of 1997 and
1996.
Net income (loss)
The Company recorded a net loss of $.3 million for the first six months of 1997
compared with net income of $1.2 million for the first six months of the prior
year primarily as a result of the foregoing. The Company's overall effective
income tax rate, including the effect of state income tax provisions, was 20%
for the first six months of 1997 compared with 40% for the first six months of
1996. The effective tax rate decreased as a result of tax credits associated
with the production and sale of landfill gas produced at the Company's landfill
gas extraction facility, which tax credits the Company expects to utilize in
1997.
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.
15
<PAGE>
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 competitors could
result in further declines in disposal rates and/or disposal volumes thereby
affecting the Company's financial performance. Additionally, a further decline
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.
The Company 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.
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 Company
incurred significant costs in the first quarter of 1997 while recognizing very
little revenue, primarily as a result of a stop work order issued by the United
States Environmental Protection Agency from January 22, 1997 until March 20,
1997. Furthermore, the Company has filed a demand for arbitration, claiming,
among other things, that its customer is in default and has materially breached
its payment obligation. The Company's customer subsequently filed a counter
claim alleging the Company has refused to proceed with the work in accordance
with the contract. The customer has engaged another contractor to complete the
project and the Company has demobilized from the project site. The Company and
its customer are currently engaged in settlement discussions. Based upon the
current discussions, the Company is contemplating a settlement which would
result in its customer paying the Company less than what has previously been
invoiced. Accordingly, the resolution would negatively impact future financial
results but would not have a material adverse effect on the Company's
consolidated financial position. If a resolution cannot be reached, the
arbitration hearing has been rescheduled for the first half of 1998.
____________________________________________
____________________________________________
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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.
During the third quarter of 1997, the Company's subsidiaries became parties
to an Agreed Order for Remedial Investigation/Feasibility Study and the
Four County Landfill Site Participation Agreement ("Participation
Agreement"). A large number of waste generators and other waste
transportation and disposal companies have also been identified as
responsible or potentially responsible parties; however, because the law
assigns joint and several liability among the responsible parties, although
unlikely, 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 ultimate 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. The Company
anticipates obtaining additional information over the next several months
by reason of, among other things, having entered into the Participation
Agreement.
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 was suspended as a result of a Stop
Work Order issued by the United States Environmental Protection Agency ("US
EPA") from January 22, 1997 until March 20, 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.
17
<PAGE>
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 proceed with the work in accordance with 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
had been lifted and that Shattuck would be engaging another contractor
to complete the project. As a result, Earth Sciences has demobilized
from the Project site.
The Company and Shattuck are currently engaged in settlement
discussions. Based upon the current discussions, the Company is
contemplating a settlement which would result in Shattuck paying the
Company less than what has previously been invoiced. Accordingly, the
resolution would negatively impact future financial results but would
not have a material adverse effect on the Company's consolidated
financial position. If a resolution cannot be reached, the arbitration
hearing has been rescheduled for the first half of 1998.
Reference is made to "Item 3. Legal Proceedings" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 for a
description of legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on April 29,
1997; however, no vote of security holders occurred with respect to any matters
reportable under this Item 4.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.64 Fourth Amendment to Loan Agreement dated July 15, 1997,
among American Waste Services, Inc., NBD Bank, The Second National
Bank of Warren, and NBD Bank, as agent.
(b) Reports on Form 8-K
None
18
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
AMERICAN WASTE SERVICES, INC.
(Registrant)
Date: August 12, 1997 By: /s/ Timothy C. Coxson
--------------------- ------------------------------------------
Timothy C. Coxson, Executive Vice President,
Finance, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
19
<PAGE>
EXHIBIT 10.64
-------------
FOURTH AMENDMENT TO LOAN AGREEMENT
----------------------------------
THIS FOURTH AMENDMENT TO LOAN AGREEMENT, dated as of July 15, 1997
(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, a Second Amendment to Credit
Agreement dated as of February 19, 1996 and a Third Amendment to Loan Agreement
dated as of December 31, 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:
l.1 Section 1.1 shall be amended as follows:
<PAGE>
(a) The definition of "Maturity Date" shall be amended by deleting
the reference therein to "Third Amendment Effective Date" and inserting
"December 31, 1996" in place thereof.
(b) A new definition of "Fourth Amendment Effective Date" shall be
added in appropriate alphabetical order as set forth below:
"Fourth Amendment Effective Date" shall mean July 15, 1997.
--------------------------------
1.2 Section 2.1 (b) shall be deleted and the following shall be
inserted in place thereof:
2.1(b) Limitation on Amount of Advances. Notwithstanding
--------------------------------
anything in this Agreement to the contrary, the aggregate
principal amount of the Advances made by Banks at any time
outstanding shall not exceed $23,000,000 until December 31, 1997,
at which time the aggregate principal amount of the Advances made
by Banks at any time outstanding shall reduce to $18,000,000
provided, however, that the aggregate principal amount of Letter
-----------------
of Credit Advances outstanding at any time shall not exceed
$13,000,000.
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
<PAGE>
any applicable 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.
<PAGE>
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 $5,000.
3.4 The Company shall have delivered to the Agent for each Bank, in
exchange for the Revolving Credit Note and Term Note heretofore delivered to
such Bank pursuant to Section 2.4 (c) of the Loan Agreement, new Revolving
Credit Note (Exhibits B-1, B-2, B-3 and B-4) and new Term Note (Exhibits C-1,
C-2, C-3 and C-4) for each of the periods referenced in Section 2.1 (b) of the
Loan Agreement, each dated the date of the Notes being exchanged, payable to
such Bank in a principal amount equal to the amount of the Commitment,
respectively, set forth opposite such Bank's name on the signature pages hereof,
and each of such Revolving Credit Notes and Term Notes delivered to the Banks
shall constitute a "Note" under the Loan Agreement amended hereby.
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.
<PAGE>
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 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.
<PAGE>
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of July 15, 1997, to be effective
as of the Fourth Amendment Effective Date.
AMERICAN WASTE SERVICES, INC.
By:________________________
Its: _________________________
NBD BANK, Individually as a Bank
and as Agent
611 Woodward Avenue By:______________________________
Detroit, MI 48226
Its: ______________________________
Attention: Agency Administration
Facisimile No.: (313) 225-2747
Fascimile
Confirmation No.: (313) 225-2747
Telephone No.: (313) 225-4749
Commitment Amount until 12/31/97: $19,600,000.00
Commitment Amount subsequent to 12/31/97: $15,000,000.00
Addresses for Notices: THE SECOND NATIONAL BANK OF WARREN
108 Main Avenue, S.W.
Warren, OH 44482 By:____________________________
Attention Larry Stofira
Its:_____________________________
Facisimile No.: (216) 841-0219
Facisimile
Confirmation No.: (216) 841-0219
Telephone No.: (216) 841-0126
Commitment Amount until 12/31/97: $3,400,000.00
Commitment Amount subsequent to 12/31/97: $3,000,000.00
<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:_______________________
Its:________________________
DARTAMERICA, INC.
By:_________________________
Its: _________________________
EARTH SCIENCES CONSULTANTS, INC.
By:__________________________
Its: __________________________
ANTECH, LTD.
By:___________________________
Its:___________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 2ND QUARTER
1997 FINANCIAL STAEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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<PP&E> 140,211
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