SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-22602
CONTINENTAL WASTE INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2909512
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
67 Walnut Avenue, Suite 103
Clark, New Jersey 07066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908)396-0018
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 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
8,371,843 shares of Common Stock, $.001 par value, were
outstanding as of November 10, 1995.
Transitional Small Business Disclosure Format Yes X No
CONTINENTAL WASTE INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet -
September 30, 1995 3
Condensed Consolidated Statements of Income -
Three Months Ended September 30, 1995 and 1994 4
Condensed Consolidated Statements of Income -
Nine Months Ended September 30, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
September 30,
1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,624,018
Accounts and notes receivable - net 6,930,869
Other current assets 6,134,448
TOTAL CURRENT ASSETS 15,689,335
LANDFILL, PROPERTY AND EQUIPMENT - net 73,604,550
EXCESS COST OVER THE FAIR VALUE
OF NET ASSETS ACQUIRED - net 13,964,922
OTHER ASSETS 10,263,778
TOTAL ASSETS $113,522,585
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current maturities $ 1,558,670
of long-term debt
Accounts payable 3,498,478
Other accrued liabilities 4,933,094
TOTAL CURRENT LIABILITIES 9,990,242
LONG-TERM DEBT, less current maturities 44,980,068
ACCRUED LANDFILL CLOSURE COSTS, less
current portion 6,710,131
OTHER LONG-TERM LIABILITIES 9,218,510
STOCKHOLDERS' EQUITY:
Common stock, $.001, authorized 10,000,000
shares, issued and outstanding 6,434,905 6,435
Additional paid-in capital 34,422,093
Retained earnings 8,667,205
Treasury stock (47,625 common shares) (472,099)
TOTAL STOCKHOLDERS' EQUITY 42,623,634
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $113,522,585
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Quarter Ended
September 30,
1995 1994
Revenue $12,964,500 $9,373,043
Costs and expenses:
Operating expenses 5,974,828 4,414,919
General and administrative expenses 1,827,444 1,361,182
Depreciation and amortization 1,807,220 1,336,559
Income from operations 3,355,008 2,260,383
Other income (expenses):
Interest expense (968,264) (628,066)
Other, net 127,042 (59,003)
Other income (expenses), net (841,222) (687,069)
Income before income taxes and
extraordinary gain 2,513,786 1,573,314
Provision for income taxes (993,221) (721,492)
Income before extraordinary gain 1,520,565 851,822
Extraordinary gain (net of $280,280 of
income taxes) --- 356,720
Net income $1,520,565 $1,208,542
----------- -----------
Earnings per share:
Primary
Income before extraordinary gain $0.22 $0.21
Extraordinary gain --- 0.09
Net income $0.22 $0.30
------- -------
Fully diluted
Income before extraordinary gain $0.22 $0.19
Extraordinary gain --- 0.08
Net income $0.22 $0.27
------ -------
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Nine Months Ended
September 30
1995 1994
Revenue $33,442,798 $19,134,871
Costs and expenses:
Operating expenses 15,351,100 9,167,741
General and administrative expenses 4,811,381 2,749,011
Depreciation and amortization 4,566,201 2,834,108
Income from operations 8,714,116 4,384,011
Other income (expenses):
Interest expense (2,266,259) (1,238,208)
Other, net 126,797 (74,093)
Other income (expenses), net (2,139,462) (1,312,301)
Income before income taxes and
extraordinary gain 6,574,654 3,071,710
Provision for income taxes (2,716,191) (1,380,786)
Income before extraordinary gain 3,858,463 1,690,924
Extraordinary gain (net of $280,280 of
income taxes) --- 356,720
Net income $3,858,463 $2,047,644
---------- ----------
Earnings per share:
Primary
Income before extraordinary gain $0.56 $0.49
Extraordinary gain --- 0.10
Net income $0.56 $0.59
------ ------
Fully diluted
Income before extraordinary gain $0.55 $0.43
Extraordinary gain --- 0.09
Net income $0.55 $0.52
------ ------
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net income $3,858,463 $2,047,644
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 4,566,201 2,834,108
Compensatory options, warrants
and common shares 23,130 129,868
Changes in operating assets and
liabilities, net of effect of
acquired businesses:
Accounts and notes receivables, net (1,281,920) (954,339)
Other current assets (261,326) (668,081)
Accounts payable 324,631 870,188
Other current liabilities (1,127,475) 1,469,016
Other long-term liabilities 31,413 277,269
Other long-term assets (920,218) 91,800
Net cash provided by operating
activities: 5,212,899 6,097,473
Cash flows from investing activities:
Capital expenditures (15,412,583)(9,941,540)
Cash paid for businesses, net of cash
acquired (5,328,309) ---
Cash acquired in business purchased
with common stock --- 323,633
Cash paid for common and preferred
stock of minority interest (1,219,739) ---
Cash held in escrow (1,901,355) (436,201)
Acquisition of landfill development
project --- (1,439,799)
Net cash used in investing activities (23,861,986)(11,493,907)
Cash flows from financing activities:
Issuance of long-term debt 43,312,968 12,517,236
Payments on long-term debt (26,267,867) (10,160,524)
Deferred financing costs paid (607,877) (395,061)
Net payments under short-term lines
of credit --- (240,000)
Exercise of warrants for common stock 218,715 ---
Issuance of common stock 305,479 4,783,749
Purchase of treasury stock (365,550) (106,549)
Net cash provided by financing
activities 16,595,868 6,398,851
Net (decrease) increase in cash and
cash equivalents (2,053,219) 1,002,417
Cash and cash equivalents, beginning
of year 4,677,237 1,062,049
Cash and cash equivalents, end of period $2,624,018 $2,064,466
---------- ----------
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 310(b) of
Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a
fair presentation (consisting of normal recurring accruals) have
been included. Operating results for the three and nine months
ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending December 31,
1995. For further information, refer to the financial statements
and footnotes thereto included in Continental Waste Industries,
Inc. ("the Company's") Form 10-KSB for the year ended December
31, 1994.
Certain amounts in previously issued financial statements have
been reclassified to conform to 1995 classifications. The
Company's $0.001 par value common stock is hereafter referred to
as Shares.
Note 2 - Business Combinations and Equity Offering
During the second half of 1994, the Company purchased a majority
interest in Victory Waste Incorporated ("Victory") and G.E.M.
Environmental Management, Inc. ("GEM") which is a subsidiary of
Victory. By June 30, 1995, the Company owned 100% of Victory and
100% of GEM. In aggregate, the Company has issued 777,030 Shares,
paid $3,395,000 in cash and payables and agreed to grant stock
options to purchase Shares worth $2,520,000 to acquire all of
Victory and GEM during the period from July 1994 to June 1995.
Approximately 191,270 Shares are contingently issuable as
additional consideration for these acquisitions.
Between April and August 1995, the Company enlarged its domestic
operations with the acquisition of four collection companies, two
transfer stations and two recycling facilities. In addition to
the new domestic acquisitions, in August 1995, the Company
acquired a 72% interest in Procesa Continental S.A. de C.V.
("Procesa"), a Mexican landfill engineering and management
company headquartered in Mexico City. Procesa, which also
operates a small roll-off collection service, performs certain
operational and supervisory functions for the largest landfill in
Mexico City, Puente de Bordo.
The aggregate purchase price of the 1995 acquisitions was $7.9
million, plus the assumption or refinancing of $2.1 million of
debt and $1.0 million of future payments contingent upon certain
financial performance levels. The purchase prices were paid by
issuing 42,020 Shares with a market value of $496,688 at the time
of issuance and cash financed through the Company's $45 million
revolving credit facility. Each of these transactions have been
accounted for using the purchase method of accounting. All of
these acquisitions were accounted for as purchases and,
accordingly, the purchase price, in some cases based on the
estimated market value of the Shares issued as consideration, was
allocated to the related assets acquired and liabilities assumed
based upon their estimated fair values at the date of
acquisition. Those estimated fair values have been adjusted as
of September 30, 1995. Any future adjustments, if any, will be
made prior to the one year anniversary of the related acquisition
and are not expected to be material. Operating results of
acquired businesses have been included in the consolidated
financial statements from the date of acquisition.
The following summarizes the pro forma operating results of the
Company for the nine months ended September 30, 1995 and 1994 as
if the acquisitions described above had occurred at the beginning
of the applicable year.
Nine Months Ended
September 30,
1995 1994
Pro forma revenue $39,795,463 $34,291,478
Pro forma income before
extraordinary gain $ 3,772,960 $ 1,638,462
Pro forma net income $ 3,772,960 $ 1,995,182
Pro forma primary earnings per
share after extraordinary gain $ 0.55 $ 0.57
Pro forma fully diluted earnings
per share after extraordinary gain $ 0.54 $ 0.50
The pro forma operating results include each acquiree's
pre-acquisition results of operations for the indicated periods
with adjustments to reflect amortization of goodwill, additional
depreciation on the increases to the fair market value of fixed
assets, interest expense on the acquisition borrowings, the
effect of income taxes thereon and the effect of the issuance of
Shares. The pro forma information given above does not purport
to be indicative of the results that actually would have been
obtained if the operations were combined during the periods
presented and is not intended to be a projection of future
results or trends.
In November 1994, the Company completed a public offering of
1,533,616 Shares (1,400,000 Shares were sold by the Company and
133,616 Shares were sold by certain stockholders of the Company).
The Company received approximately $11.6 million of net proceeds
from the sale of which approximately $3.1 million was used to
redeem all of the outstanding Series B preferred shares and pay
related accrued interest and dividends. The remaining $8.5
million was used for general corporate purposes, which included
working capital, capital expenditures (primarily for the
expansion of existing landfills) and acquisitions.
Concurrent with the public offering, in order to eliminate the
accrual of any further dividends on its Series A preferred stock,
the Series A preferred stockholders agreed to and have converted
the 425,200 Series A preferred shares into 425,200 Shares. The
Company, in consideration of the conversion, issued warrants to
purchase 42,656 Shares at an exercise price of $9.50 to the
holders of the Series A preferred shares. The warrants expire in
1999.
Note 3 - Earnings Per Share
Primary earnings per share for all periods presented are based
upon the weighted average number of common and common equivalent
shares outstanding during such periods, contingent shares and
options related to the Victory Waste acquisition and adjusted net
income. Common equivalent shares result from dilutive stock
options and warrants. Primary weighted average shares were
3,448,000 and 4,113,000 for the nine months and for the quarter
ended September 30, 1994, respectively.
Fully diluted earnings per share are similarly computed but
include the effect of the Company's convertible Series A
preferred stock which were outstanding during the three and nine
months ended September 30, 1994 and were converted to Shares in
November 1994. Fully dilutive weighted average shares were
3,917,000 and 4,554,000 for the nine months and for the three
months ended September 30, 1994, respectively.
Earnings per share for the quarter and nine months ended
September 30, 1995 was based on the following:
Primary Fully Diluted
Quarter Nine Months Quarter Nine Months
Ended Ended Ended Ended
9/30/95 9/30/95 9/30/95 9/30/95
Weighted average
common and common
equivalent shares:
Shares outstanding 6,367,002 6,277,446 6,367,002 6,277,446
Dilutive stock
options and
warrants 411,950 450,355 431,822 470,241
Contingent shares
and options related
to the Victory
acquisition 85,318 85,318 190,874 190,874
6,864,270 6,813,119 6,989,698 6,938,561
--------- --------- --------- ---------
Income available to
common stockholders:
Net income $1,520,565 $3,858,463 $1,520,565 $3,858,463
Amortization of
incremental goodwill
upon issuance of
additional contingent
shares (14,717) (33,850) (14,717) (33,850)
$1,505,848 $3,824,613 $1,505,848 $3,824,613
---------- ---------- ---------- ----------
Note 4 - Supplemental Cash Flows Disclosure
Nine Months Ended
September 30,
1995 1994
Cash paid during the period for:
Interest, net of interest capitalized $2,069,170 $ 1,294,067
Income taxes $1,233,011 $ 439,844
Shares and warrants issued in settlement
of certain obligations $ --- $ 168,297
Business acquisitions:
Shares issued $ 496,688 $ 5,418,000
Notes issued to sellers 2,034,284 ---
Cash paid 5,328,309 ---
Total consideration paid 7,859,281 5,418,000
Assets received 10,789,901 29,267,000
Liabilities assumed $2,930,620 $ 23,849,000
---------- -------------
Warrants for the purchase of common
stock issued in settlement of debt $ --- $ 75,000
---------- -------------
Shares issued for the acquisition of
land and equipment $ --- $ 200,000
---------- -------------
<PAGE>
Note 5 - Other Information
Selected balance sheet account disclosures follow:
September 30,
1995
Allowance for doubtful accounts $ 336,123
Accumulated depreciation and amortization
of property and equipment $12,004,179
Accumulated amortization of excess cost
over the fair value of net assets acquired $ 1,174,322
Note 6 - Debt
On March 28, 1995, the Company entered into a new $45.0 million
credit facility (the "Credit Facility") with LaSalle National
Bank ("LNB"). The Credit Facility, which expires in June 1998,
refinanced certain existing indebtedness and provided additional
funds for the operation of the Company. The Credit Facility has
been subsequently syndicated to the Bank of America and the First
Bank of Boston. Each borrowing under the Credit Facility bears
interest based on the Company's leverage ratio, as defined, of
total liabilities (not including draws on the Credit Facility) to
tangible net worth. If the leverage ratio is less than 1.25 to
1, then the interest rate is prime. If the leverage ratio range
falls between 1.25 to 1.75 compared to 1, then the rate is prime
plus 0.5%. If the leverage ratio is greater than 1.75 to 1, then
the interest rate is prime plus 1.0%. Alternatively, at the
Company's election, borrowings may bear interest at an adjusted
LIBOR rate plus (depending again on the Company's leverage ratio)
2.0%, 2.5% or 3.0%. The Credit Facility includes provisions for
letters of credit up to $5.0 million, however, such letters of
credit reduce the funds available for other borrowings under the
Credit Facility. The Company is required to pay a fee equal to
0.5% fee on the average unused portion of the Credit Facility and
up to 2.0% on average outstanding letters of credit. The Credit
Facility is secured by all corporate assets and a pledge of the
stock of all subsidiaries. At September 30, 1995, $41.6 million
was outstanding under the Credit Facility and bore interest at a
weighted average interest of 9.2% per annum.
Under the Revolver, the Company is required to meet certain
financial covenants. On October 5, 1995 the Company amended the
Credit Facility to permit expenditures at the level projected by
the Company for the fiscal year ended December 31, 1995. As of
September 30, 1995, the Company was in compliance with all such
covenants.
Note 7 - Subsequent Event
In October 1995, the Company and certain of its stockholders
completed a public offering including subsequent exercise by the
underwriters of the over-allotment of 2,268,408 Shares (1,975,656
Shares were sold by the Company and 272,592 Shares were sold by
certain stockholders of the Company). The Company received
approximately $30.2 million of net proceeds from the sale. The
proceeds were used to reduce the outstanding indebtedness under
the Company's $45.0 million revolving credit facility (the
"Credit Facility") which provided the Company with renewed
borrowing capacity under the Credit Facility for future
acquisitions, capital expenditures and general corporate
purposes.
In October 1995, the Company purchased, through one of its
subsidiaries, a sanitary landfill in Richland County, South
Carolina. The acquiring subsidiary, which is 85% owned by the
Company, was organized recently to make acquisitions of landfills
and related solid waste management operations and to pursue
privatization and public-private partnership opportunities in the
Southeastern United States. The Company has an option to acquire
the remaining 15% of the subsidiary for approximately $2.4
million of common stock of the Company. The Company on behalf of
its subsidiary paid $2.4 million in cash and notes, and assumed
$1.1 million of debt for the landfill. As a condition of the
landfill purchase, a South Carolina collection company has
entered into, among other things, a 10-year put-or-pay disposal
contract with the Company to provide a minimum of 300 tons of
waste per day, and a 120-day disposal contract for 500 tons of
waste per day, with a right of first refusal to the Company for a
long-term extension.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Background:
Continental Waste Industries, Inc. (the "Company") provides
integrated solid waste management services to approximately
175,000 residential, commercial and industrial customers
concentrated primarily in the Midwestern and Mid-South regions of
the United States. These services include non-hazardous landfill
disposal, solid waste collection, transfer station operations and
recycling programs. The Company also provides solid waste
management services in Costa Rica and Mexico.
The Company's growth strategy is centered around landfill and
collection business acquisitions and a landfill capacity
expansion program primarily within mid-sized regional markets, as
well as selected Latin American markets. The Company pursues a
"hub and spoke" acquisition strategy, involving the acquisition
of landfills in its target markets as well as collection
operations around Company-owned landfills. The Company targets
both profitable and under-performing landfills and collection
businesses. The Company will also consider acquiring recycling
businesses in markets where these businesses can complement the
Company's solid waste management services.
Results of Operations
Quarter Ended September 30, 1995 Compared to Quarter Ended
September 30, 1994
Revenue:
Revenue increased by $3.6 million, or 38.3%, to $13.0 million
from $9.4 million. The increase in revenue was primarily due to
the acquisitions of two hauling and collection companies acquired
in the second quarter and two in the third quarter of 1995, a
recycling facility in the third quarter of 1995, and a 72%
interest in a Mexican landfill engineering and management company
as well as increased waste collection.
Operating Expenses:
Operating expenses, including depreciation and amortization,
increased by $2.0 million from $5.8 million to $7.8 million but
decreased as a percentage of revenue from 61.4% to 60.0%,
respectively. The percentage decrease was primarily due to
operating cost efficiencies achieved in 1995 at the landfill
operations. The dollar increase was primarily due to the above
mentioned acquisitions.
General and Administrative Expenses:
General and administrative expenses increased by $466,000 from
$1.4 million to $1.8 million and decreased as a percentage of
revenues from 14.5% to 14.1%. The percentage decrease was a
result of certain acquired companies experiencing a lower
percentage of general and administrative expenses to revenue than
the Company did in the prior year. The dollar increase was
primarily due to the above mentioned acquisitions.
Interest Expense:
Interest expense was $628,000 for the third quarter of 1994
compared to $968,000 for the same period in 1995. The increase
was due primarily to increased levels of debt assumed or incurred
in the acquisitions previously mentioned and the financing of
capital expenditures.
Provision for Income Taxes:
The provision for income taxes increased by $272,000 from
$721,000 to $993,000 as a result of a higher income level
partially offset by a lower effective tax rate in 1995.
Extraordinary Gain:
The Company recorded a $357,000 after-tax extraordinary gain on
the early retirement of certain debt at a discount in 1994.
Net Income:
For the reasons discussed above, the Company's net income
increased by $312,000 from $1.2 million to $1.5 million.
Results of Operations
Nine Months Ended September 30, 1995 Compared to Nine Months
Ended September 30, 1994
Revenue:
Revenue increased by $14.3 million, or 74.8%, to $33.4 million
from $19.1 million. The increase in revenue was primarily due to
the acquisition of Victory Waste Incorporated ("Victory") on July
1, 1994 ($7.4 million), the acquisitions of a Costa Rican
landfill and hauling operations during the third quarter of 1994,
two hauling and collection companies in the second quarter and
two in the third quarter of 1995, a recycling facility in the
third quarter of 1995, and a 72% interest in a Mexican landfill
engineering and management company as well as increased waste
collection.
Operating Expenses:
Operating expenses, including depreciation and amortization,
increased by $7.9 million from $12.0 million to $19.9 million in
the first nine months of 1995 but decreased as a percentage of
revenue from 62.7% to 59.6%, respectively. The percentage
decrease was primarily attributable to the economies of scale in
the Company's landfill operations achieved through higher
activity levels Victory experienced a lower percentage than it
did in the prior year. The dollar increase was primarily due to
the above mentioned acquisitions.
General and Administrative Expenses:
General and administrative expenses increased by $2.1 million
from $2.7 million to $4.8 million and remained constant as a
percentage of revenues at 14.4% to 14.6%. The dollar increase
was primarily due to the above mentioned acquisitions.
Interest Expense:
Interest expense was $1.2 million for the nine months of 1994
compared to $2.3 million for the same period in 1995. The
increase was due primarily to increased levels of debt assumed or
incurred in the acquisition of Victory and the other acquisitions
previously mentioned and the financing of capital expenditures.
Provision for Income Taxes:
The provision for income taxes increased by $1.3 million from
$1.4 million to $2.7 million as a result of a higher income level
partially offset by a lower effective tax rate in 1995.
Extraordinary Gain:
The Company recorded a $357,000 after tax extraordinary gain on
the early retirement of certain debt at a discount in 1994.
Net Income:
For the reasons discussed above, the Company's net income
increased by $1.8 million from $2.1 million to $3.9 million.
Liquidity and Capital Resources
The Company's cash requirements consist principally of working
capital, payments of principal and interest on its outstanding
indebtedness, capital expenditures and business acquisitions. At
September 30, 1995, the Company had working capital of $5.7
million, an increase of $7.8 million since September 30, 1994,
and its cash and cash equivalents balance was $2.6 million. The
growth in working capital is primarily attributable to the
November 1994 public offering and additionally to private
offerings of its common stock ($16.5 million in 1994), the
exercise of warrants for common stock ($1.2 million in 1994), and
the reclassification of certain of the Company's debt from
short-term to long-term as a result of entering into a $45
million long-term revolving credit facility agreement in March
1995.
Cash Flow from Operating Activities:
During the nine months ended September 30, 1995 and 1994, net
cash provided by operating activities was $5.2 million and $6.1
million, respectively. This decrease is primarily due to current
liabilities decreasing in the first nine months of 1995 versus
increasing in the same period of 1994, long-term assets
increasing in the first nine months of 1995 versus decreasing in
the same period of 1994 and other current assets increasing less
in the first nine months of 1995 versus 1994. Partially
offsetting these effects were higher earnings (excluding the
effect of noncash charges) in the nine months of 1995 versus the
same period in 1994.
Cash Flow from Investing Activities:
During the nine months ended September 30, 1995 and 1994, the
Company made capital expenditures of approximately $15.4 million
and $9.9 million, respectively, for landfill expansions and
equipment additions. The Company expects total expenditures for
1995 will be approximately $17.0 million to $18.0 million.
During 1995 the Company increased its funding of escrow accounts
by $1.5 million over 1994 for closure and post-closure costs.
During the nine months ended September 30, 1995 the Company paid
$5.3 million for acquired businesses. Between April and August
1995, the Company enlarged its domestic operations with the
acquisition of four collection companies, two transfer stations
and two recycling facilities. In addition to the new domestic
acquisitions, in August 1995, the Company acquired a 72% interest
in Procesa Continental S.A. de C.V. ("Procesa"), a Mexican
landfill engineering and management company headquartered in
Mexico City. Procesa, which also operates a small roll-off
collection service, performs certain operational and supervisory
functions for the largest landfill in Mexico City, Puente de
Bordo.
Cash Flow from Financing Activities:
Cash flows from financing activities were approximately $16.6
million and $6.4 million during the first nine months of 1995 and
1994, respectively. The increase was primarily due to the effect
of new indebtedness in the first nine months of 1995 to fund
capital expenditures, business acquisitions and escrow accounts
for closure and post-closure.
On March 28, 1995, the Company entered into a new $45.0 million
credit facility (the "Credit Facility") with LaSalle National
Bank ("LNB"). The Credit Facility, which expires in June 1998,
has been subsequently syndicated to the Bank of America and the
First Bank of Boston. Each borrowing under the Credit Facility
bears interest based on the Company's leverage ratio, as defined,
of total liabilities (not including draws on the Credit Facility)
to tangible net worth. If the leverage ratio is less than 1.25
to 1, then the interest rate is prime. If the leverage ratio
range falls between 1.25 to 1.75 compared to 1, then the rate is
prime plus 0.5%. If the leverage ratio is greater than 1.75 to
1, then the interest rate is prime plus 1.0%. Alternatively, at
the Company's election, borrowings may bear interest at an
adjusted LIBOR rate plus (depending again on the Company's
leverage ratio) 2.0%, 2.5% or 3.0%. The Credit Facility includes
provisions for letters of credit up to $5.0 million, however,
such letters of credit reduce the funds available for other
borrowings under the Credit Facility. The Company is required to
pay a fee equal to 0.5% fee on the average unused portion of the
Credit Facility and up to 2.0% on average outstanding letters of
credit. The Credit Facility is secured by all corporate assets
and a pledge of the stock of all subsidiaries. At September 30,
1995, $41.6 million was outstanding under the Credit Facility and
bore interest at a weighted average interest of 9.2% per annum.
Under the Revolver, the Company is required to meet certain
financial covenants. As of September 30, 1995, the Company was
in compliance with all such covenants. On October 5, 1995 the
Company amended the Credit Facility to permit expenditures at the
level projected by the Company for the fiscal year ended December
31, 1995.
During the first nine months of 1995, 29,635 shares of common
stock were issued upon the exercise of certain warrants for
$218,715.
In October 1995, the Company and certain of its stockholders
completed a public offering including subsequent exercise by the
underwriters of the over-allotment of 2,268,408 Shares (1,975,656
Shares were sold by the Company and 272,592 Shares were sold by
certain stockholders of the Company). The Company received
approximately $30.2 million of net proceeds from the sale. The
proceeds were used to reduce the outstanding indebtedness under
the Company's $45.0 million revolving credit facility (the
"Credit Facility") which provided the Company with renewed
borrowing capacity under the Credit Facility for future
acquisitions, capital expenditures and general corporate
purposes.
In October 1995, the Company purchased, through one of its
subsidiaries, a sanitary landfill in Richland County, South
Carolina. The acquiring subsidiary, which is 85% owned by the
Company, was organized recently to make acquisitions of landfills
and related solid waste management operations and to pursue
privatization and public-private partnership opportunities in the
Southeastern United States. The Company has an option to acquire
the remaining 15% of the subsidiary for approximately $2.4
million of common stock of the Company. The Company on behalf of
its subsidiary paid $2.4 million in cash and notes, and assumed
$1.1 million of debt for the landfill. As a condition of the
landfill purchase, a South Carolina collection company has
entered into, among other things, a 10-year put-or-pay disposal
contract with the Company to provide a minimum of 300 tons of
waste per day, and a 120-day disposal contract for 500 tons of
waste per day, with a right of first refusal to the Company for a
long-term extension.
The Company believes that cash from operating activities, cash on
hand, additional borrowings under the Credit Facility, issuance
of additional debt, and access to capital markets, including
public and private placement offerings, will be sufficient to:
(i) finance its planned 1995 and 1996 development projects and
capital expenditures; (ii) meet its 1995 and 1996 operating cash
requirements; and (iii) meet expected debt service obligations
during the next two years.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a)
Exhibit Sequential
Number Document Description Page
Number
3.1 Certificate of Incorporation of Continental
Waste Industries, Inc. (incorporated by
reference to Exhibit 3.1 to the Annual Report
on Form 10-KSB of Continental Waste Industries,
Inc. filed on March 31, 1994,
Commission File No. 0-22602).
3.2 By-Laws of Continental Waste Industries, Inc.
(incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
November 4, 1994, Commission File No. 33-84130).
3.3 Amendment to Certificate of Incorporation of
Continental Waste Industries, Inc. (incorporated
by reference to Exhibit 3.3 to the Registration
Statement on Form SB-2 of Continental Waste
Industries, Inc. filed on November 4, 1994,
Commission File No. 33-84130).
10.1 Employment Agreement between Continental Waste
Industries, Inc. and Thomas A. Volini
(incorporated by reference to Exhibit 10.1 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
September 12, 1995, Commission File No. 33-62589).
10.2 Employment Agreement between Continental
Waste Industries, Inc. and Carlos E. Aguero
(incorporated by reference to Exhibit 10.2 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc.filed on
September 12, 1995, Commission File No. 33-62589).
10.3 Employment Agreement between Continental
Waste Industries, Inc. and Michael J. Drury
(incorporated by reference to Exhibit 10.3 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
September 12, 1995, Commission File No. 33-62589).
10.4 Employment Agreement between Continental
Waste Industries, Inc. and Timothy J. Salopek
(incorporated by reference to Exhibit 10.4 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
September 12, 1995, Commission File No. 33-62589).
10.5 Employment Agreement between Continental Waste
Industries, Inc. and G. Michael Shannon
(incorporated by reference to Exhibit 10.4 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
November 4, 1994, Commission File No. 33-84130).
10.6 Employment Agreement between Continental Waste
Industries, Inc. and Dallas C. Schnitzius
(incorporated by reference to Exhibit 10.5 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
November 4, 1994, Commission File No. 33-84130).
10.7 Credit Agreement by and among LaSalle National
Bank as agent, the Lenders Signatory or
Parties Thereto and Continental Waste
Industries, Inc. and its Subsidiaries
(incorporated by reference to Exhibit 10.8 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
September 12, 1995, Commission File No. 33-62589).
10.8 First Amendment to Credit Agreement by and among
LaSalle National Bank as agent, the Lenders
Signatory or Parties Thereto and Continental
Waste Industries, Inc. and its Subsidiaries
(incorporated by reference to Exhibit 10.8 to
the Registration Statement on Form SB-2 of
Continental Waste Industries, Inc. filed on
September 12, 1995, Commission File No. 33-62589).
10.9 Second Amendment to Credit Agreement by and
among LaSalle National Bank as agent, the
Lenders Signatory or Parties Thereto and
Continental Waste Industries, Inc. and its
Subsidiaries (incorporated by reference to
the Current Report on Form 8-K to Continental
Waste Industries, Inc. filed on October 27, 1995,
Commission File No. 0-22602).
10.10 Agreement for Exchange of Stock Among
Continental Waste Industries, Inc., Dallas C.
Schnitzius and G. Michael Shannon (incorporated
by reference to the Current Report on Form 8-K
of Continental Waste Industries, Inc. filed on
July 15, 1994, Commission File No. 0-22602.
b) Reports on Form 8-K:
On August 28, 1995, the Company filed a report
on Form 8-K under "Item 2. Acquisition or
Disposition of Assets" and "Item 7. Financial
Statements and Exhibits." The historical and
proforma financial information required under
"Item 7. Financial Statements and Exhibits"
was filed on October 11, 1995.
On October 27, 1995, the Company filed a report
on Form 8-K under "Item 5. Other Events"
and "Item 7. Financial Statements and Exhibits."
No financial statements were filed.
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 13, 1995
By: /s/ Michael J. Drury
MICHAEL J. DRURY
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at September 30, 1995 and Consolidated
Statement of Operations for the nine months ended September 30, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,624,018
<SECURITIES> 0
<RECEIVABLES> 7,266,992
<ALLOWANCES> 336,123
<INVENTORY> 0
<CURRENT-ASSETS> 15,689,335
<PP&E> 85,608,729
<DEPRECIATION> 12,004,179
<TOTAL-ASSETS> 113,522,585
<CURRENT-LIABILITIES> 9,990,242
<BONDS> 44,980,068
<COMMON> 6,435
0
0
<OTHER-SE> 42,617,199
<TOTAL-LIABILITY-AND-EQUITY> 113,522,585
<SALES> 0
<TOTAL-REVENUES> 33,442,798
<CGS> 0
<TOTAL-COSTS> 15,351,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,266,259
<INCOME-PRETAX> 6,574,654
<INCOME-TAX> 2,716,191
<INCOME-CONTINUING> 3,858,463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,858,463
<EPS-PRIMARY> .56
<EPS-DILUTED> .55
</TABLE>
