UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 31, 1997
TRANSAMERICAN WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19615 13-3487422
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
10554 TANNER ROAD
HOUSTON, TEXAS
77041
( address of principal executive office)
(Zip Code)
(713) 956-1212
(Registrant's telephone number, including area code)
<PAGE>
The undersigned registrant, TransAmerican Waste Industries, Inc. and
Subsidiaries (the "Company") hereby amends Item 7. "Financial Statements, Pro
Forma Financial Information and Exhibits" of its Current Report on Form 8-K,
dated February 18, 1997 as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Attached hereto as Schedule A is the Sanifill Assets Acquired Statement of
Net Assets as of December 31, 1996, and the Statements of Revenue and Direct
Operating Expenses for the years ended December 31, 1995 and 1996 and the
related notes thereto, together with the Report of Independent Public
Accountants of Arthur Andersen LLP concerning the Statements and related notes.
(b) PRO FORMA FINANCIAL INFORMATION.
Attached hereto as Schedule B are the Unuadited Pro Forma Condensed
Consolidated Balance Sheet of the Company as of December 31, 1996, the Unaudited
Pro Forma Condensed Consolidated Statement of Operations of the Company for the
year ended December 31, 1996, and the related notes thereto, to show the pro
forma effects of (i) the acquisition of the Sanifill Assets, (ii) the Private
Placement of the Company's common stock, and (iii) the borrowings under the Bank
Facility.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this amendment on Form 8-K/A to be signed on its
behalf by the undersigned hereunto duly authorized.
TRANSAMERICAN WASTE INDUSTRIES, INC.
Date: April 18, 1996 By: LANCE C. RUUD
Senior Vice President and
Chief Financial Officer
<PAGE>
SCHEDULE A
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TransAmerican Waste Industries, Inc.:
We have audited the accompanying statement of net assets of the Sanifill
Assets Acquired as of December 31, 1996, and the related statements of revenue
and direct operating expenses for the years ended December 31, 1996 and 1995.
These statements are the responsibility of the management of TransAmerican Waste
Industries, Inc. Our responsibility is to express an opinion on these 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.
As described in Note 2, the accompanying financial statements were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in Form 8-K of TransAmerican
Waste Industries, Inc. and are not intended to be a complete financial
presentation of the Sanifill Assets Acquired.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets of the Sanifill Assets Acquired as of
December 31, 1996, and the revenue and direct operating expenses for the years
ended December 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
April 11, 1997
1
<PAGE>
SANIFILL ASSETS ACQUIRED
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
Property and equipment, net ................................ $11,276
Goodwill and other assets, net ............................. 2,624
-------
Net assets ............................................ $13,900
=======
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SANIFILL ASSETS ACQUIRED
STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES
(IN THOUSANDS)
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1995 1996
------- --------
Revenue ............................................ $ 7,769 $ 13,885
Direct operating expenses:
Cost of services ................................ 6,357 12,857
Depreciation and amortization ................... 1,072 1,682
General and administrative ...................... 923 1,662
Impairment loss ................................. -- 12,685
------- --------
Total direct operating expenses .............. 8,352 28,886
------- --------
Deficit of revenues over direct
operating expenses ......................... $ (583) $(15,001)
======= ========
The accompany notes are an integral part of these financial statements.
3
<PAGE>
SANIFILL ASSETS ACQUIRED
NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND
Sanifill of Texas Hauling, Inc. and subsidiaries ("Hauling"),
incorporated as a Texas corporation in November 1993, was engaged in the
business of acquiring, operating and developing nonhazardous solid waste
collection operations. Hauling was a wholly-owned subsidiary of Sanifill, Inc.
("Sanifill"), a Delaware corporation. In connection with the acquisition of
Sanifill by USA Waste Services, Inc. ("USA Waste") in 1996, the United States
Department of Justice ordered the divestiture of certain assets and operations
from the combined operations of USA Waste (the "Order"). Pursuant to the Order,
USA Waste accepted the bid of TransAmerican Waste Industries, Inc.
("TransAmerican"), a Delaware corporation. A definitive purchase and sale
agreement was executed in December 1996, by and between TransAmerican and
Sanifill and certain affiliated companies, for the purchase of the common stock
of Hauling and certain assets of affiliated Sanifill and USA Waste companies
(collectively, the "Sanifill Assets Acquired"). Prior to the sale of Hauling,
USA Waste transferred certain assets used in a commercial roll-off container
operation and a transfer processing facility (which USA Waste had identified as
separate business operations not subject to the Order) out of Hauling.
Additionally, the outstanding debt incurred by Hauling to finance various
acquisitions was retained by Sanifill. In consideration for the sale of these
assets, USA Waste received $13.6 million in cash and warrants to purchase
1,500,000 shares of TransAmerican common stock at an exercise price of $1.50 per
share.
The Sanifill Assets consist primarily of 45 residential collection
routes and 13 commercial collection routes in the Houston, Texas metropolitan
area, servicing approximately 100,000 and 4,000 customers, respectively, a
20-acre construction and demolition landfill, two office, maintenance and
parking facilities, and preferred pricing for the disposal of waste at two of
USA Waste's landfills. The preferred pricing agreement gives TransAmerican the
option to deliver two million tons, limited to 270,000 tons per year, of
municipal solid waste at preferred prices, which in no event shall be less
favorable than the most favorable terms provided to USA Waste's other customers.
Since its incorporation, Hauling has grown primarily through the
acquisition of commercial and residential collection operations servicing the
Houston, Texas metropolitan area. This operation was part of Sanifill's strategy
of acquiring collection companies to bring solid waste to its existing landfill
operations. All the acquisitions have been accounted for as purchases and have
been included in the operations of the Sanifill Assets Acquired since the date
of acquisition. The 1995 and 1996 acquisitions are summarized below:
YEAR ENDED DECEMBER 31, 1996
ANCHOR WASTE SYSTEMS, INC. AND RECYCLING DEPOT, INC. In May 1996,
Hauling purchased certain assets from Anchor Waste Systems, Inc. and Recycling
Depot, Inc. (collectively, "Anchor") used in commercial collection operations,
consisting primarily of collection containers and customer contracts. Under the
terms of the purchase agreement, Anchor agreed not to compete with Hauling in
the territory, as defined, with regard to the commercial collection operations
and Hauling agreed not to compete with Anchor for mutual customers, as defined,
for its roll-off and recyclables operations. The non-compete agreements are for
a period of ten years. The consideration for the acquisition consisted of
$500,000 in cash at the closing, a $50,000 obligation payable in five annual
installments, and preferred pricing for a period of one year at Sanifill's
construction and demolition landfills. As discussed above, the balance of the
outstanding obligation was retained by Sanifill and has therefore been excluded
from the accompanying financial statements.
4
<PAGE>
SANIFILL ASSETS ACQUIRED
NOTES TO FINANCIAL STATEMENTS
CUSTOM WASTE CONTROL, INC. In March 1996, Hauling purchased the
assets of Custom Waste Control, Inc. used in the collection of residential solid
waste and its roll-off operations, consisting primarily of customer contracts,
trucks, collection containers and related equipment. Total consideration paid
included $4,325,000 at closing, $1,500,000 in seller financing over two years,
and $1,175,000 of debt forgiveness and assumption of third party debt. The terms
of the purchase agreement included a non-compete clause for a period of five
years. As discussed above, the roll-off operations (approximately $5.3 million
of the purchase price), and the balance of the seller financing and debt assumed
was retained by Sanifill and has therefore been excluded from the accompanying
financial statements.
BEN-SINGER, INC. In February 1996, Hauling purchased Ben-Singer,
Inc., a residential solid waste collection company, for $1,800,000 in Sanifill
common stock, $1,700,000 in cash at closing, $500,000 seller financing over five
years, and the assumption of approximately $412,000 of debt. In connection with
the purchase, the seller entered into a ten year non-compete agreement. As
discussed above, the balance of the seller financing and debt assumed was
retained by Sanifill and has therefore been excluded from the accompanying
financial statements.
YEAR ENDED DECEMBER 31, 1995
FAMILY SANITATION SERVICE, INC. In April 1995, Hauling purchased the
assets of Family Sanitation Service, Inc. used in the collection of residential
solid waste, consisting primarily of customer contracts, trucks, collection
containers and related equipment. Total consideration consisted of $2,000,000 in
Sanifill common stock, $1,000,000 seller financing over five years, and the
assumption of approximately $250,000 of debt. The terms of the purchase
agreement included a non-compete clause for a period of five years. As discussed
above, the balance of the seller financing and the debt assumed was retained by
Sanifill and has therefore been excluded from the accompanying financial
statements.
WYBLE SOLID WASTE DISPOSAL SERVICE, INC. In April 1995, Hauling
purchased the assets of Wyble Solid Waste Disposal Service, Inc. used in the
collection of residential solid waste for $425,000 of Sanifill common stock. The
assets consisted primarily of customer contracts, trucks, collection containers
and related equipment. The terms of the purchase agreement included a
non-compete clause for a period of ten years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. As discussed above, in December 1996 Sanifill
entered into an agreement to sell the Sanifill Assets Acquired to TransAmerican.
The accompanying statement of net assets and statements of revenue and direct
operating expenses include the accounts of Hauling and certain assets of
affiliated Sanifill and USA Waste companies that were included in the January
1997 sale of the Sanifill Assets Acquired to TransAmerican. These financial
statements omit certain operations and assets of Hauling, consisting primarily
of a roll-off container operation, a transfer processing facility and certain
working capital items that were retained by USA Waste. During the periods
presented, the Sanifill Assets Acquired were not accounted for as a separate
operation by Sanifill. Therefore, full separate financial statements prepared in
accordance with generally accepted accounting principles do not exist and are
not practical to obtain under the current circumstances.
As a result, the accompanying financial statements are not intended
to be a complete presentation of the Sanifill Assets Acquired and results of
operations had it been operated as a stand-alone entity. Rather, these financial
statements were prepared for the purpose of complying with Rule 3-05 of
Regulation S-X of the Securities and Exchange Commission.
5
<PAGE>
SANIFILL ASSETS ACQUIRED
NOTES TO FINANCIAL STATEMENTS
All intercompany accounts and transactions of the acquired entities
have been eliminated. See further discussion of related party transactions in
Note 3.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost,
including interest on funds borrowed to finance the construction of major
additions. Expenditures for major additions and improvements are capitalized.
Minor replacements, maintenance and repairs which do not improve or extend the
life of such assets are charged to expense as incurred. When property is retired
or disposed of, it is removed from the accounts at cost less accumulated
depreciation and amortization and any resulting gain or loss is reflected in
current operations.
For financial reporting purposes, depreciation is calculated using
the straight-line method. Estimated useful lives are as follows:
ESTIMATED LIVES
(IN YEARS)
Vehicles and equipment........................... 4-12
Buildings and improvements....................... 5-35
Furniture and fixtures........................... 3-5
GOODWILL. For transactions accounted for as a purchase, the excess of
cost over fair value of the net assets of acquired businesses is amortized on a
straight-line basis over 40 years. Long-lived assets, including goodwill, are
reviewed for impairment whenever events or changes in circumstance indicate that
the carrying amount of an asset may not be recoverable. When the estimated
undiscounted future cash flows are less than the carrying amount of an asset, an
impairment loss is recognized. The impairment loss is measured as the amount by
which the carrying amount exceeds the fair value of the asset (assets to be held
and used) or fair value less cost to sell (assets to be disposed of). The fair
value is typically calculated by discounting the asset's expected future cash
flow. In connection with the Order discussed above, an impairment loss of $12.7
million was recognized in the accompanying statement of revenues and direct
operating expenses related to the assets to be disposed of.
OTHER ASSETS. Other assets consist primarily of non-compete
agreements which are being amortized over the life of the agreement.
REVENUE AND DIRECT OPERATING EXPENSES. Revenues for the collection of
nonhazardous solid waste are recognized as services are rendered. Direct
operating expense associated with the revenues are primarily incurred as
services are rendered and are accrued to properly match revenue and expense.
Direct operating expenses (including certain allocations from Sanifill,
primarily insurance costs) include the costs of vehicle drivers, vehicle
operating expenses, disposal costs (see Note 3), maintenance and operating
costs, depreciation and amortization, supplies, and selling, general and
administrative expenses. Certain additional administrative costs and the cost to
finance operations, incurred by Sanifill on behalf of and to support Hauling,
have been excluded from these financial statements because those costs have
historically been included in Sanifill's consolidated statement of operations
and there is no practical basis to allocate such costs to the various
businesses.
INCOME TAXES. Income taxes are accounted for using the liability
method. Under this method, deferred taxes are recorded based upon differences
between the financial reporting and tax basis of the assets and liabilities and
are measured using the enacted tax rates. A valuation allowance is provided
when, based on management's estimate, it is more likely than not that a deferred
tax asset will not be realized in future periods.
6
<PAGE>
At December 31, 1996, a valuation allowance was provided for the net
deferred tax assets due to uncertainties and limitations on Hauling's ability to
use such assets to offset future taxable income. The deferred tax assets consist
primarily of net operating losses and tax basis of depreciable assets exceeding
the book basis resulting from the recognition of an impairment loss which are
not currently deductible for tax purposes.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during that reported period. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
As discussed above, Hauling was operated as a wholly-owned subsidiary
of Sanifill for the purpose of acquiring collection operations to bring
nonhazardous municipal solid waste to Sanifill's landfills. Hauling had agreed
upon rates with Sanifill for deliveries of such waste at Sanifill' s landfills
and transfer stations. During 1995 and 1996, Hauling incurred disposal fees of
$1.5 million and $3.1 million, respectively, from Sanifill for the disposal of
waste. The disposal fees were to approximate the then current market rate;
however, there can be no assurance that Hauling would have been able to obtain
such disposal rates for the quantities of waste disposed of in an arms length
transaction.
4. PROPERTY AND EQUIPMENT
The major categories of property and equipment are as follows (in
thousands):
December 31,
-------------------------
1995 1996
-------- --------
Landfill ..................................... $ 636 $ 953
Vehicles and equipment ....................... 5,126 8,675
Buildings, land and improvements ............. 3,323 3,428
Furniture and fixtures ....................... 181 329
-------- --------
9,266 13,385
Less: accumulated depreciation ............... (1,149) (2,109)
-------- --------
$ 8,117 $ 11,276
======== ========
7
<PAGE>
SCHEDULE B
<PAGE>
TRANSAMERICAN WASTE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited condensed consolidated balance sheet as of
December 31, 1996 and the unaudited pro forma condensed consolidated statement
of operations for the year then ended, reflect the financial position and
results of operations, respectively, of TransAmerican Waste Industries, Inc. and
Subsidiaries (the "Company") as if (i) the acquisition of the Sanifill Assets,
(ii) the Private Placement of the Company's common stock, and (iii) the
borrowings under the Bank Facility, had occurred, in the case of the balance
sheet, on December 31, 1996 and, in the case of the statement of operations, on
January 1, 1996. These statements do not purport to be indicative of the results
of operations of the Company that might have been obtained had these events
actually then occurred or of the Company's future results.
The acquisition of the Sanifill Assets was accounted for using the
purchase method of accounting. Based on management's preliminary analysis, the
tangible and intangible assets acquired and reserves for loss contracts assumed
are recorded at their respective fair values.
The pro forma condensed consolidated financial statements are based
on certain assumptions and estimates which are subject to change. The pro forma
condensed consolidated financial statements should be read in conjunction with
the notes thereto, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and the statement of net assets and statements of
revenue and direct operating expenses of the Sanfill Assets Acquired, included
herein.
1
<PAGE>
TRANSAMERICAN WASTE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Pro Forma and
----------------------- Transaction Pro Forma
Company Sanifill Adjustments As Adjusted
-------- --------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 1,334 $ -- $ 6,100(a) $ 2,634
8,500(b)
(13,300)(c)
Restricted cash ......................................... 879 -- -- 879
Accounts receivable, net ................................ 3,381 -- -- 3,381
Other current assets .................................... 1,019 -- -- 1,019
-------- ------- -------- --------
Total current assets ................................ 6,613 -- 1,300 7,913
Restricted cash ............................................. 13,400 -- -- 13,400
Property and equipment, net ................................. 27,052 11,276 -- 38,328
Deferred financing costs, net ............................... 2,453 -- -- 2,453
Other assets ................................................ 3,156 2,624 350(b) 8,230
(1,000)(c)
3,100(d)
-------- ------- -------- --------
Total assets ........................................ $ 52,674 $13,900 $ 3,750 $ 70,324
======== ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................ $ 1,447 $ -- $ -- $ 1,447
Accrued liabilities and other ........................... 1,746 -- 800(d) 2,546
Current portion of promissory notes ..................... 1,338 -- (7)(c) 1,331
Current portion of long-term debt ....................... 1,731 -- 892(b) 2,623
Reserve for closure and post-closure costs .............. 211 -- -- 211
-------- ------- -------- --------
Total current liabilities ........................... 6,473 -- 1,685 8,158
Promissory notes, net of current portion .................... 693 -- (693)(c) --
Long-term debt, net of current portion ...................... 37,414 -- 7,258(b) 44,672
Reserve for closure and post-closure costs .................. 4,114 -- -- 4,114
Other liabilities ........................................... 2,344 -- 2,300(d) 4,644
-------- ------- -------- --------
Total liabilities ................................... 51,038 -- 10,550 61,588
-------- ------- -------- --------
Stockholders' equity:
Sanifill equity ......................................... -- 13,900 (13,900)(c) --
Common stock ............................................ 31 -- 11(a) 42
Additional paid-in capital .............................. 25,799 -- 5,839(a) 31,638
Warrants ................................................ 394 -- 1,250(a)(b)(c) 1,644
Retained earnings (deficit) ............................. (24,588) -- -- (24,588)
-------- ------- -------- --------
Total stockholders' equity .......................... 1,636 13,900 (6,800) 8,736
-------- ------- -------- --------
Total liabilities and stockholders' equity .......... $ 52,674 $13,900 $ 3,750 $ 70,324
======== ======= ======== ========
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these financial statements.
2
<PAGE>
TRANSAMERICAN WASTE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Pro Forma and
------------------------- Transaction Pro Forma
Company Sanifill Adjustments As Adjusted
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ..................................................... $ 16,022 $ 13,885 $ -- $ 29,907
Expenses:
Cost of services ........................................ 8,699 12,857 (800)(d) 20,756
Depreciation and amortization ........................... 1,632 1,682 (190)(a) 3,124
General and administrative .............................. 3,220 1,662 -- 4,882
Cost of terminated acquisitions ......................... 50 -- -- 50
Impairment loss ......................................... -- 12,685 (12,685)(b) --
-------- -------- -------- --------
Operating income (loss) ............................. 2,421 (15,001) 13,675 1,095
-------- -------- -------- --------
Other income (expense):
Interest expense, net ................................... (2,155) -- (838)(c) (2,993)
Other income, net ....................................... 572 -- -- 572
-------- -------- -------- --------
Total other expense ................................. (1,583) -- (838) (2,421)
-------- -------- -------- --------
Solid waste income (loss) ................................... 838 (15,001) 12,837 (1,326)
Loss from oil recovery and disposal operations .............. (7,705) -- -- (7,705)
-------- -------- -------- --------
Loss before income taxes ............................ (6,867) (15,001) 12,837 (9,031)
Provision for income taxes .................................. 50 -- -- (e) 50
-------- -------- -------- --------
Net loss ............................................ $ (6,917) $(15,001) $ 12,837 $ (9,081)
======== ======== ======== ========
Loss per common share ....................................... $ (.23) $ (.22)
======== ========
Weighted average common
shares outstanding ...................................... 30,281 41,531
======== ========
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these financial statements.
3
<PAGE>
TRANSAMERICAN WASTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET REFLECTS THE
FOLLOWING ADJUSTMENTS:
(a) Records the issuance of 11,250,000 shares of common stock at $.60 per
share, net of placement agent's commission, offering expenses, and
warrants issued to the placement agent to purchase one million shares of
common stock at an exercise price of $.66 per share.
(b) Records borrowings under the Bank Facility and the issuance of warrants to
purchase two million shares of common stock at an exercise price of $1.00
per share and one million shares of common stock at an exercise price of
$1.25 per share, to a board member for services provided in connection
with the acquisition of the Sanifill Assets and his guarantee of the Bank
Facility.
(c) Records the payment of the $13.6 million purchase price for the
acquisition of the Sanifill Assets, (including the December 1996 down
payment of $1 million), issuance of USA Warrants and the retirement of the
December Note.
(d) Records accrual for loss contracts assumed in the acquisition of the
Sanifill Assets. The Sanifill Assets Acquired were operated as part of
Sanifill's strategy of acquiring collection companies to bring solid waste
to its existing landfill operations. As a result, the operations were able
to obtain waste disposal under terms and conditions which would not
necessarily be available to the Company. Additionally, inherent risk in
the bid process for waste collection contracts can impact the results of
operations because the actual volumes of waste generated, the availability
of disposal facilities and equipment, labor, maintenance and other
operational factors can vary from initial estimates.
THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS REFLECTS
THE FOLLOWING ADJUSTMENTS:
(a) Records adjustment to depreciation and amortization to reflect the
Company's basis in assets acquired and estimated useful lives, as follows
(in thousands):
YEAR ENDED
DECEMBER 31, 1996
-----------------
Elimination of historical depreciation and
amortization expense ................................. $(1,682)
Depreciation and amortization for revised
basis in assets ...................................... 1,492
-------
$ (190)
=======
(b) Eliminate the $12.7 million impairment loss recognized in connection with
the sale of the Sanifill Assets to the Company.
(c) Records interest expense related to the Bank Facility used to fund the
purchase price of the Sanifill Assets.
(d) Reflects the adjustment for loss contracts assumed in the acquisition of
the Sanifill Assets.
(e) Due to uncertainties and limitations surrounding the Company's ability to
utilize acquired net operating loss carryforwards to offset taxable income
in future periods, a pro forma tax benefit is not recognized in the
accompanying unaudited pro forma condensed consolidated statement of
operations.
4
