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 March 31, 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 22-3285335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
67 Walnut Avenue, Suite 103
Clark, New Jersey 07066
(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
6,231,253 shares of Common Stock, $.001 par value, were
outstanding as of May 10, 1995.
Transitional Small Business Disclosure Format Yes X No
<PAGE>
CONTINENTAL WASTE INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet -
March 31, 1995 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 10<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONTINENTAL WASTE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
March 31,
1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,126,395
Accounts and notes receivable-net 5,407,349
Other current assets 5,025,688
TOTAL CURRENT ASSETS 14,559,432
PROPERTY AND EQUIPMENT - net 61,868,854
EXCESS COST OVER THE FAIR VALUE
OF NET ASSETS ACQUIRED - net 8,213,457
OTHER ASSETS 6,748,704
TOTAL ASSETS $91,390,447
CURRENT LIABILITIES
Current maturities of long-term debt $ 765,859
Accounts payable 2,933,582
Other accrued liabilities 4,108,817
TOTAL CURRENT LIABILITIES 7,808,258
LONG-TERM DEBT, less current maturities 27,821,048
ACCRUED LANDFILL CLOSURE COSTS, less
current portion 6,769,836
OTHER LONG-TERM LIABILITIES 9,330,303
MINORITY INTEREST 1,244,636
STOCKHOLDERS' EQUITY:
Common stock, $.001, authorized 10,000,000
shares, issued and outstanding 6,231,253
in 1995 6,231
Additional paid-in capital 32,684,692
Retained Earnings 5,831,992
Treasury stock (11,070 common shares) (106,549)
TOTAL STOCKHOLDERS' EQUITY 38,416,366
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $91,390,447
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)
Three Months Ended
March 31,
1995 1994
Revenue $9,708,413 $4,373,791
Costs and expenses:
Operating expenses 4,671,750 2,225,987
General and administrative
expenses 1,271,933 655,249
Depreciation and amortization 1,360,190 660,480
Income from operations 2,404,540 832,075
Other income (expenses):
Interest expense (579,190) (297,600)
Other, net 14,673 5,618
Other income (expenses), net (564,517) (291,982)
Income before income taxes and
minority interest 1,840,023 540,093
Provision for income taxes (772,810) (237,641)
Minority interest in subsidiaires'
income (43,963) - - -
Net income $1,023,250 $ 302,452
Earnings per share:
Primary $0.15 $0.10
Fully diluted $0.15 $0.09
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)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net income $1,023,250 $302,452
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,360,190 660,480
Compensatory warrants 7,710 -
Minority interest in subsidiaries'
income 43,963 -
Changes in operating assets and
liabilities:
Accounts and notes receivable, net (111,579) (574,333)
Other current assets (265,801) (119,118)
Accounts payable 24,896 (544,118)
Other current liabilities (1,297,555) (237,998)
Other long-term liabilities 347,673 80,978
Other long-term assets (849,800) 35,139
Net cash provided by (used in)
operating activities 282,947 (396,518)
Cash flows from investing activities:
Capital expenditures (3,922,874) (1,435,386)
Cash paid for common and preferred
stock of minority interest (368,490) -
Acquisition of landfill development
project - (1,400,000)
Net cash used in investing
activities (4,291,364) (2,835,386)
Cash flows from financing activities:
Issuance of long-term debt 25,014,039 2,319,197
Payments on long-term debt (21,775,179) (1,019,818)
Net borrowings under short-
term lines of credit - 160,000
Exercise of warrants for
common stock 218,715 -
Issuance of common stock - 1,571,753
Net cash provided by financing
activities 3,457,575 3,031,132
Net decrease in cash and cash
equivalents (550,842) (200,772)
Cash and cash equivalents,
beginning of year 4,677,237 1,062,049
Cash and cash equivalents,
end of period $4,126,395 $861,277
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
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 quarter ended March 31,
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 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.
Note 2- Business Combination 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. As of March 31, 1995, the Company owns approximately
98% of Victory and 85% of GEM. As of March 31, 1995, the Company
has issued 750,339 common shares ("Shares"), $2,824,889 in cash
and payables and contingent options with a fair market value of
approximately $2,520,000. There are also 191,270 contingent
Shares outstanding for the purchase of these companies. It is
the Company's intention to acquire the remaining capital stock of
Victory and GEM that it does not presently own.
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 the 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 the periods 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 net income. Common
equivalent shares result from dilutive stock options and
warrants. Primary weighted average shares were 6,810,000 and
2,961,000 for the quarters ended March 31, 1995 and 1994,
respectively.
Fully diluted earnings per share are similarly computed but
include, if dilutive, the effect of the Company's convertible
Series A preferred stock which was outstanding during the first
quarter of 1994. Fully dilutive weighted average shares were
6,929,000 and 3,395,000 for the quarters ended March 31, 1995 and
1994, respectively.
Note 4 - Supplemental Cash Flows Disclosure
Three Months Ended
March 31,
1995 1994
Cash paid during the period for:
Interest, net of interest capitalized $1,288,252 $411,312
Income taxes $1,225,511 $402,555
Common stock issued for receivable $ --- $722,750
Common stock issued in settlement of
certain liabilities $ --- $ 93,297
Note 5 - Other Information
Selected balance sheet account disclosures follow:
March 31,
1995
Allowance for doubtful accounts $ 349,852
Accumulated depreciation and amortization
of property and equipment $9,221,281
Accumulated amortization of excess cost
over the fair value of net assets acquired $ 925,277
Note 6 - Debt
On March 28, 1995, the Company entered into a $45 million
revolving credit facility agreement (the "Revolver") with LaSalle
National Bank ("LNB") expiring in March 1998. At March 31, 1995,
the weighted average interest rate of the outstanding Revolver
was 9.2%. The Revolver includes provisions for letters of credit
up to $5.0 million. The Company also has a 1/2 % fee on the
average unused portion of the Revolver and up to 2.0% on average
outstanding letters of credit. The Revolver is secured by all
corporate assets and a pledge of the stock of all subsidiaries.
As of March 31, 1995, pursuant to a post-closing deliveries
agreement between the Company and LNB, the Company could not
borrow in excess of $35 million of the credit facility until the
Company had provided LNB with certain documents consisting
principally of certain stock certificates, Uniform Commercial
Code termination statements and site surveys. The majority of
these requirements have since been fulfilled and the Company has
access to the entire $45 million Revolver.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Background:
Continental Waste Industries, Inc. (the "Company") provides
integrated non-hazardous waste management services through the
operation of landfills, transfer stations, and hauling companies
in selected urban, suburban and rural markets, primarily
concentrated in the central United States. The Company's
objective is to continue to expand as an integrated provider of
nonhazardous solid waste management services in selected markets
in the United States and Latin America. The Company's strategy
for achieving this objective is to expand in current
marketplaces, acquire customer routes and purchase new
businesses.
Results of Operations
Quarter Ended March 31, 1995 Compared to Quarter Ended March 31,
1994
Revenues:
Revenues increased by $5.3 million, or 122%, from $4.4 million to
$9.7 million. The increase in revenues was primarily due to the
acquisition of Victory Waste Incorporated ("Victory") on July 1,
1994 ($3.3 million), increased landfill activity, the acquisition
of a Costa Rican landfill and hauling operations and increased
waste collection.
Operating Expenses:
Operating expenses, including depreciation and amortization,
increased by $3.1 million from $2.9 million to $6.0 million in
the first quarter of 1995 compared with the same period in 1994
but decreased as a percentage of revenue from 66.0% to 62.1%,
respectively. The percentage decrease was primarily attributable
to the economics of scale in the Company's landfill and
collection operations achieved through higher activity levels
which improved the percentage relationship. The dollar increase
was primarily due to the acquisition of Victory.
General and Administrative Expenses:
General and administrative expenses increased by $617,000 from
$655,000 to $1.3 million and decreased as a percentage of
revenues from 15.0% to 13.1%. The percentage decrease was a
result of higher revenues without corresponding increases in
administrative costs. The dollar increase was primarily due to
the acquisition of Victory.
Interest Expense:
Interest expense was $298,000 for the first quarter of 1994
compared to $579,000 for the same period in 1995. The increase
was due primarily to increased levels of debt assumed in the
acquisition of Victory.
Provision for Income Taxes:
The provision for income taxes increased by $535,000 from
$238,000 to $773,000 as a result of a higher income level
partially offset by a lower effective tax rate in 1995.
Net Income:
For the reasons discussed above, the Company's net income
increased by $721,000 from $302,000 to $1.0 million.
Preferred Stock Dividends:
Series A and Series B Preferred Stock dividends had been
suspended since April 1, 1993, by agreement with the holders of
such stock. In November 1994, all of the outstanding shares of
the Series A and Series B preferred shares were converted into
common shares and redeemed, respectively.
Changes in Financial Condition, Liquidity and Capital Resources
The Company's cash requirements consist principally of working
capital, payments of principal and interest on its outstanding
indebtedness and capital expenditures. At March 31, 1995, the
Company had a working capital surplus of $6.8 million, and its
cash and cash equivalents balance was $4.1 million. The working
capital surplus is primarily attributable to the 1994 public and
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 restructuring of the Company's debt by entering into a
$45 million long-term revolving credit facility agreement in
March 1995.
Cash Flow from Operating Activities:
During the quarters ended March 31, 1995 and 1994, net cash
provided by operating activities was $283,000 and ($397,000),
respectively. This increase is primarily due to higher earnings
(excluding the effect of noncash charges) in the first quarter of
1995 versus the same period in 1994, and accounts receivables
increasing less in the first quarter of 1995 versus the same
prior year period. These were offset by other long-term assets
increasing more in the first quarter of 1995 compared with the
same prior year period and net accounts payable and accrued
expenses decreasing more in the first quarter of 1995 versus
1994.
Cash Flow from Investing Activities:
During the quarters ended March 31, 1995 and 1994, the Company
made capital expenditures of approximately $3.9 million and $2.8
million, respectively, for landfill expansions, equipment
additions and a landfill development project in 1994. The
Company expects total expenditures for 1995 will be approximately
$8.0 million to $10.0 million.
Cash Flow from Financing Activities:
Cash flows from financing activities were approximately $3.5
million and $3.0 million during first quarter of 1995 and 1994,
respectively. The increases were due to the effect of new
indebtedness and private placements of common stock in the first
quarter of 1994.
On March 28, 1995, the Company entered into a $45 million
revolving credit facility agreement (the "Revolver") with LaSalle
National Bank ("LNB") expiring in March 1998. At March 31, 1995,
the weighted average interest rate of the outstanding Revolver
was 9.2%. The Revolver includes provisions for letters of credit
up to $5.0 million. The Company also has a 1/2% fee on the
average unused portion of the Revolver and up to 2.0% on average
outstanding letters of credit. The Revolver is secured by all
corporate assets and a pledge of the stock of all subsidiaries.
As of March 31, 1995, pursuant to a post-closing deliveries
agreement between the Company and LNB, the Company could not
borrow in excess of $35 million of the credit facility until the
Company had provided LNB with certain documents consisting
principally of certain stock certificates, Uniform Commercial
Code termination statements and site surveys. The majority of
these requirements have since been fulfilled and the Company has
access to the entire $45 million Revolver.
During the first quarter of 1995, 29,635 shares of common stock
were issued upon the exercise of certain warrants for $218,715.
The Company believes that cash from operating activities, cash on
hand, additional borrowings under the Revolver, issuance of
additional debt, and access to capital markets, including public
and private placement offerings, will be sufficient to: (i)
finance its planned 1995 development projects and capital
expenditures; (ii) meet its 1995 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) Exhibits:
None.
b) Reports on Form 8-K:
None.
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: May 12, 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 March 31, 1995 and Consolidated
Statement of Operations for the three months ended March 31, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,126,395
<SECURITIES> 0
<RECEIVABLES> 5,757,201
<ALLOWANCES> 349,852
<INVENTORY> 0
<CURRENT-ASSETS> 14,559,432
<PP&E> 71,090,135
<DEPRECIATION> 9,221,281
<TOTAL-ASSETS> 91,390,447
<CURRENT-LIABILITIES> 7,808,258
<BONDS> 27,821,048
<COMMON> 6,231
0
0
<OTHER-SE> 38,410,135
<TOTAL-LIABILITY-AND-EQUITY> 91,390,447
<SALES> 0
<TOTAL-REVENUES> 9,708,413
<CGS> 0
<TOTAL-COSTS> 6,031,940
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 579,190
<INCOME-PRETAX> 1,840,023
<INCOME-TAX> 772,810
<INCOME-CONTINUING> 1,023,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,023,250
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
